Extending the RMT
Extensions of the RMT can explain the operation of the systemic inflation created by monetary policy. Why is this of concern? The interest of the work force as wage-earners, and as the consumers in the economy, is that prices of goods and services (housing rents, prices and cost of food and energy etc) remain accessible. On the part of of supply side production companies, the concern is with the prices of assets, that make up production inputs and overheads (land, commercial real estate, commodities and energy), do not rise too fast if at all.
Systemic inflation caused by monetary policy can be analysed by creating an extended function for Y as follows. The Y in the RMT, or the QTM, is essentially total stransactions as the disposable income spent on items with an average price of P. Therefore, for illustrative purposes Y can be represented1 as:
Y = (t + w + vc + fc)
Where Y is total transactions (worker income/consumption = corporate revenue), t is corporate profit or individual savings, w is work force wages or corporate revenue, vc is consumer variable costs such as essentials or variable inputs for companies and fc is fixed or overhead costs such as domestic rentals or house prices and any fixed equipment durables or commercial mortgage or rentals or prices of commercial properties and capital equipment.
1 The representation of Y combines the costs impacting both corporate production inputs as well as consumer cost of living items to reflect the impact on the purchasing power of real disposable wages. This is only done this way to raise awarenessof the combined cost effects.
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