Originally posted by Sin City
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It is the same basic tenant as inflation but in an isolated form.
In this example we are going to treat university system as an independent country.
First it is essential that you understand that increasing the available monetary supply within an economy invariably leads to inflation and increase in prices within that economy.
In severe instances, like in Zimbabwe, when the money supply is increased at an absurd rate, so do the prices of every day goods and services.
Now in our example the schools are our country. For this example we will call it Schoolsville.
Now in the past, Schoolsvilles monetary supply was tightly controlled, the prices of goods and services (tuition) within Schoolsville was rather constant.
One day, the Federal Bank of Schoolsville decided to print a large quantity of money (student loans), as per economic theory, the price of goods an services within the economy of Schoolsville increased.
As you can see, the spiraling price of education is directly related to the increasing availability of student loans. With more money in the school system, prices will rise to the point of equilibrium.
If you need any further clarification on how the increased supply of money for education has lead to an increase in the prices of education, let me know and I will do my best to clarify.
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