The relative change in labor productivity, namely in magnitude of commodity value, will result in relative price changes. The change (adjustment) in relative price is realized through the change of absolute price, which, in soft money system, has a "downward rigidity". when the bank note inflates passively, there will be a "dressing upward (dressing to the highest absolute price)" trend in the relative price adjustment process, which may lead to the increase of absolute price, thus causing the rise in overall price level. This is the overall price level effect based upon the relative change in labor productivity. The sort of rise in overall price level is known as the law-of-value-regulated rise of overall price level. Normally, the rise is gentle. However, when reaching the "turning point for acceleration", the rise would be harmful, on which the monetary policy does not work.
|Overall Price Level Effect Based upon the Relative Change in Labor Productivity
|Published - 2011