Law Of Supply Is Also Operative...

Economists and policy-makers try to bring equality or equilibrium in demand and supply, and, prices and unemployment by the use of the economic-policies, monetary and fiscal, while targeting a higher standard of living by adjusting the money supply on a general assumption that inflation might increase in the short-run in order to achieve full-employment, full-demand, full supply and full growth based on the growth of population or labour-force. However, high-demand and low-supply result in higher prices, therefore manipulating, the both, might bring stability in prices or inflation and unemployment. The adjustment is also brought by price and price expectations by targeting real prices or the inflation adjusted prices, when there is inflation or nominal prices are higher than real prices, the monetary/fiscal policy is tightened to bring demand lower to supply, that is a standard prescription, but the same outcome might also be achieved if supply is also increased, higher prices would itself increase the supply and lower the price level. The law of supply is also operative in the economy if we target higher inflation adjusted prices or real prices by increasing money-supply and lowering the nominal interest rate or the borrowing cost, lower borrowing cost would help increase supply. Nonetheless, in the past limited land and food prices and later the fuel prices had been mainly responsible for assuming inflation and inflation expectation as result of expansion in money-supply and lower interest rate, but higher productivity of land due to extensive use of better techniques and higher supply of fuel due to more investment and innovation in the area of energy and also a decreasing world population has all contributed to lower inflation or deflation and expectations. Moreover, lower real natural rate of interest has also helped increase investment and supply and lower the price-level and expectation about them. Therefore, it is the need of the hour to construct models based on the assumption that prices may also fall as a result of expansion in money supply and lower interest rate or borrowing cost and higher supply, competition from multi-nationals has also resulted in price completion and lower prices.  If the policy-makers target lower inflation or deflation and expectations by increasing money-supply and lowering the borrowing cost and increase supply in a controlled manner it might also set equilibrium in demand and supply, and, inflation/deflation and unemployment…