Comments on: Virtual economics http://www.26econ.com/virtual-economics/ Online economics Mon, 08 Sep 2008 16:34:06 +0000 http://wordpress.org/?v=2.3.2 By: aaron http://www.26econ.com/virtual-economics/#comment-528 aaron Wed, 14 Nov 2007 10:54:08 +0000 http://www.26econ.com/virtual-economics/#comment-528 Gabriel: Right ... I think. I guess there's still a question of why the game grew so fast in the first place. But maybe it was just becoming popular with players, and the game operators didn't increase the money supply fast enough, or something. Gabriel: Right … I think. I guess there’s still a question of why the game grew so fast in the first place. But maybe it was just becoming popular with players, and the game operators didn’t increase the money supply fast enough, or something.

]]> By: Gabriel Mihalache http://www.26econ.com/virtual-economics/#comment-526 Gabriel Mihalache Wed, 14 Nov 2007 08:52:07 +0000 http://www.26econ.com/virtual-economics/#comment-526 Inflation is growth in the stock of money in excess of real GDP and increase in velocity? M v = p Y p_dot = M_dot + v_dot - Y_dot If the economy of the game grew faster than the money stock then you get deflation. No mistery. Velocity is also an issue... It's basically given by the financial "technology" used in the economy. If the stock of money in the economy "switched hands" slower, you can get deflation. For real-life applications we traditionally assume v_dot to be 0, in the long run. Inflation is growth in the stock of money in excess of real GDP and increase in velocity?

M v = p Y

p_dot = M_dot + v_dot - Y_dot

If the economy of the game grew faster than the money stock then you get deflation. No mistery.

Velocity is also an issue… It’s basically given by the financial “technology” used in the economy. If the stock of money in the economy “switched hands” slower, you can get deflation. For real-life applications we traditionally assume v_dot to be 0, in the long run.

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