Quantity theory of money:money supply has a direct and proportional relationship with the price level.
The reason why some people advocate inflation is based on the fallacy that money is wealth: Each person thinks that as long as he more money at hand, he can certainly buy more goods. People ignore purchasing power.
Inflation will actually benefits a favored group of people in short run; in the long run, it will hurt the whole nation.
Why inflation, once happened,is hard to stop?
(1)The favored group, who have political power, will insist inflation.
(2)The value of money, depends on the subjective valuation of the people who hold it.
Purchasing power cannot improve merely by printing more money. The essence of market is goods exchange and money only serves as a media.
Over emphasis on export actually hurts domestic economics.
(1)We are actually exports goods outside.The consequence is that domestic people cannot have as many goods to choose as before,which will thus decrease the living standard.
(2)Restriction on import will in return cut the choice of goods domestically. For example, we can no longer enjoy the wine in Country A.
(3)Since there's more money floating in my country, the money will depreciate and thus my purchasing power will fall.
(4)When my country give loan to other country, we are shifting our purchasing power to other country and we have to take the risk that the country cannot pay back,which will deteriorate our situation.
The essence of export is to offset import.
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