When the money supply exceeds the demand, people will have more money, so what will people do with the increased money? A good way is to buy various bonds to preserve the value, so that the demand for bonds will increase. The price of bonds is determined by its supply relationship. Demand is greater than supply, which will cause bond prices to rise. Many bonds are fixed income, and the income will not change when bond prices rise. This shows that the actual interest rate keeps falling, and people will follow it when trading bonds. < P > inflation is a devaluation of a country's currency that causes price increases. The essential difference between inflation and general price increase: general price increase refers to the temporary, partial and reversible price increase of a certain commodity due to the imbalance between supply and demand, which will not cause currency depreciation; Inflation is a sustained, universal and irreversible rise in the prices of major domestic commodities that can cause a country's currency to depreciate. The direct cause of inflation is that the amount of money circulating in a country is greater than its effective economic aggregate. The direct reason why a country's currency in circulation is greater than its effective economic aggregate is that the growth rate of a country's basic currency issuance is higher than that of its effective economic aggregate.

The reasons why the growth rate of a country's base currency issuance is higher than that of its effective economic aggregate include monetary policy and non-monetary policy. Monetary policy includes loose monetary policy and adjusting economy by means of interest rate exchange rate; Non-monetary policies include loan inflation caused by the financial system dominated by indirect investment and financing, excessive export surplus in international trade for a long time, excessive foreign exchange reserves, speculative monopoly, corruption and waste, increasing social transaction costs, lowering the quality of economic development, unbalanced economic structure, misleading consumption expectations, etc. Therefore, inflation is not only a monetary phenomenon, but also an important reason for inflation.

whether it is monetary policy or non-monetary policy, monetary phenomenon or real economy bubble, the fundamental reason of inflation is that the GDP growth mode causes the GDP moisture to be too high, the ineffective economic aggregate is too large, and the effective supply is seriously insufficient, resulting in the reduction of monetary efficiency.

generally speaking, inflation will inevitably lead to price increases, but it cannot be said that all price increases are inflation. There are many factors that affect the price increase. Writer Sanzhong said: inflation writes the price history, and the relationship between supply and demand describes the price band. (the decision of the price history is inflation and the decision of the price curve is supply-demand relation.)

① The circulation of paper money must be limited to the amount needed in circulation. If too much paper money is issued, the price will rise.

② The price of commodities is directly proportional to the value of commodities. As the value of commodities increases, the price of commodities will rise.

③ The price is affected by the relationship between supply and demand. When the supply of goods is in short supply, the price will rise.

④ Policy adjustment and rationalizing the price relationship will lead to an increase.

⑤ Poor circulation of commodities, poor market management, arbitrary charges and fines will also lead to the rise of commodity prices. It can be seen that only when the price increase is caused by the excessive issuance of paper money is inflation.