Does a strong economic recovery after a recession always lead to inflation?
No
Economists traditionally expect inflation to increase when the economy is producing more than it normally would. This is called the output gap, and it is defined as the difference between actual national income (GDP) and a counterfactual measure of what the economy could produce if land, labor and capital were utilized at their normal rates. The output gap is likely to shift from negative to positive over the rest of 2021 in response to government spending and low interest rates. But the relationship between the output gap and inflation has been an unreliable predictor of inflation over the past few decades. Two other factors that influence inflation are long-term expectations of inflation among the public and increases in the prices of inputs to the production process, like lumber and oil.
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EconoFact What Drives Rising Inflation?
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