Question

Suppose that a researcher discovers that a measure of the total amount of debt in the U.S. economy over the past twenty years was a better predictor of inflation and the business cycle than M1 or M2. Does this discovery mean that we should define money as equal to the total amount of debt in the​ economy? Part 2

Answer 1

Not necessarily. Although the total amount of debt has predicted inflation and the business cycle better than M1 or M2, it may not be a better predictor in the future.

What is inflation?

• Price increases, or inflation, can be thought of as the gradual loss of purchasing power.
• The average price increase of a selection of products and services over time can serve as a proxy for the rate at which buying power declines.
• A unit of currency effectively buys less as a result of the increase in pricing, which is sometimes stated as a percentage.
• Deflation, which happens when prices fall and buying power rises, can be compared to inflation.
• The objective of measuring inflation is to determine the overall effect of changes in price for a variety of goods and services.

Without some theoretical reason for believing that the total amount of debt will continue to predict well in the future, we may not want to define money as the total amount of debt.

Know more about inflation with the help of the given link:

brainly.com/question/15692461

#SPJ4