Under the rule of supply and demand, when demand is up, supply is down, and prices increase. In the reversal, when demand is down, supply is up, and prices fall.
During eras of high unemployment, people are buying less and spending less; therefore, supply goes up… prices fall. However, instances of higher-than-usual unemployment are rare; thus, demand for goods and services remains high… as prices.
I mention all of this because the June Consumer Price Index (CPI) was released on Tuesday and financial news headlines were all over the place. To the average consumer, it’s hard to tell if June’s CPI figure was good news or bad.
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