Post #1904416

No. That is because of the simplistic definition. If people have "too much" money, the demand of products will go up. Specially "luxury" products. As that is what people buy when they have "too much" money. Increasing demand increases prices, therefore, inflation. The same is true if the supply of "luxury" products decrease. For the same reasons. However, if inflation is due to an increase of "essential" goods' prices, it's trickier. That is because increasing essential prices won't result in a decline of their demand. They are essential, people will stop buying the things they don't need, not the ones they do. Therefore, the demand of "luxury" goods will fall. Only when people can't afford the essential goods will they stop buying them. Which probably would mean death/emigration. Only then will demand fall, because there's literally less people. When you tax, it's the same case. People have less money, so demand for "luxury" items will fall. So technically yes, it would reduce inflation, since there's probably some "luxury" goods in the basket you are using to measure inflation. But it won't actually reduce the price of essential goods, which is what most people would expect from a fall of inflation. Of course, some fall of demand for "luxury" goods could mean a fall in "essential" goods. For example, a fall in water-gun fights or golf-course watering would mean a fall in demand for water, which is an essential good. Economics is not a simple subject