Hyperinflation

 

  Increasing liquidity allows consumers to purchase more product, forcing suppliers to increase the price of the product as well as the quantity. The difference between P1 and P2 is inflation. The difference between Q1 and Q2 is the newly created wealth or abundance.

 With inflation, we can manipulate businesses to create more wealth for society. Whoever drew this curve drew the line to indicate there will be marginal returns down the road if liquidity continues to be pumped in for businesses and consumers. Near the end of the line, the supply curve no longer extends towards the far right end, but instead exponentially extends upward. This is to indicate that no additional liquidity would ever cause added productivity beyond this point. That the only change that can occur is price.

 This is a well constructed curve because it acknowledges that eventually, no matter how much liquidity you continue to add, productivity will not follow. The curve recognizes real life constraints like 100 percent employment and 100 percent utilization of factories, and retail outlets. You can only hire a person once. With no more people left unemployed and no more factories left unused, no matter how much money you throw at the system, the system is not going to create more wealth.