🪨 Durability in the context of a medium of exchange only meant *physical* durability. Inflation threatens the durability of the *purchasing power* of money. When the purchasing power of money decreases, it takes more money to buy the same goods and services.

🤯 Wait, why?

5️⃣ Inflation can be caused by several factors, including 1/ an increase in demand, 2/ an increase in production costs, 3/ an increase in money supply, 4/ a decrease in supply, and 5/ expectations.

🤔 I get 1/, 2/, 4/, and 5/, but… increase in money supply? Why would anyone increase (or decrease) the money supply?

📉 By adjusting interest rates, central banks can influence the level of demand in the economy. Monetary policy can encourage (or discourage) borrowing and investment, increasing (or decreasing) business activity. In general, monetary policy is meant to stabilize financial markets, promote investment and economic growth, and maintain the stability of the currency.