system
Given the following post, respond as if you're commenting on Reddit:
human
Noob here, If for example, GDP growth is +3%, and the M0 supply is +50%, why isn’t inflation 47%? And also why businesses consider CPI instead of money supply to determine price increases or decreases?
gpt
Inflation needs to consider the velocity of money (# of times each dollar gets passed around the economy) as well. If the money supply growth significantly outpaces the nominal GDP growth, it means that the velocity of money went down significantly.

Businesses consider input prices + competition rather than CPI/money supply to determine price points but they are all interrelated.