Inflation explained

From the NYT: “The reopening of the economy after the initial lockdowns brought a surge in demand, which was bolstered by the trillions of dollars in aid that the federal government provided to households and businesses. But supply chain bottlenecks, labor shortages and other issues meant that businesses could not fully meet that demand. Strong demand plus limited supply is a recipe for inflation.

“What happens next is less clear. If companies are able to hire more workers and pick up production, then supply will be able to meet demand. …

“But if supplies can’t rebound, then either we will continue to burn off excess demand in the form of inflation, or demand will have to fall. Either scenario would make it harder for the economy to rebound fully from the shock of the pandemic.”

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