Notice that is I don’t always mahna mahna but when I do doo doot doo do doo shirt measuring only wealth sold, not all wealth. That is where inflation fits in. For example if 110 million dollars pays for all the wealth sold this year and 100 million dollars pays for the same amount of wealth sold in the anchor year, which was 5 years ago, the inflation rate is 10% over 5 years or 2% per year average. The total “real” wealth sold would a hundred million dollars. The value of wealth sold measured in terms of what that currency would buy in the anchor year is 100 million.
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Now if we I don’t always mahna mahna but when I do doo doot doo do doo shirt have ascertained that 110 million dollars of spending have occurred in the current year, that doesn’t mean we have determined that we have a 110 million dollars in currency, because a given amount of money can be used for spending over and over. In fact the proper way to calculate the amount of spending is the take the average number of times each unit of the money supply is used for spending in that year (the velocity of money V) times the face value of the total amount of money in the money supply (M). And if you notice, the amount of wealth we are concerned with, when calculating the inflation rate, was not the total amount of wealth. It is only the total amount of wealth sold. Now if you wanted to calculate the “real” or inflation adjusted value of all the wealth existing in the present year.