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August 20, 2014

Homework Help: Econ

Posted by Leo on Sunday, January 21, 2007 at 10:45pm.

What effect do lifting of price controls have on inflation in the long run?

I need some ideas...
I think inflation will eventually be under control in the long run, but i don't know what factors will cause that.

Good tough question. Take a shot. I would think that lifting a binding price control (on say rental housing), would 1) raise prices in the short run, followed by 2) a generally lowering of prices as suppliers increase supply and the market clears, followed by 3) stable prices in the particular market (i.e., no inflationary/deflationary pressures).

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