Consumer price inflation depends on four main factors: The velocity of money (how much it moves around), the amount of money available, supply, and demand. With the latter two being a potential result of the former two (amongst other external factors that have an influence on supply and demand).
So yes, if people don't move (less velocity) and if less money is available (lost job), then that will be deflationary. This effectively yields lower demand. At the same time, if less supply is available, that's inflationary.
Now, good luck at predicting how supply and demand will behave, especially if you add more money to the game.
For example, it could happen that if the crisis ends faster than anticipated, too much money has been injected into the economy and demand picks up much faster than projected. This would be highly inflationary, especially if you add a drop in supply simultaneously (more money chasing less goods).
On the other hand, it may happen that regardless of how much money you add, people are just not going to spend it, because they can't (low velocity). Then you might end up with deflation anyway, conclude that you should add even more money, and eventually end up in the scenario described above.
Too make it even more complex, you might end up with inflation in one class of goods and deflation in another at the same time. Looking at a broader picture by including not only consumer goods, you might for example inflate an already existing asset bubble (housing) even more, while simultaneously suffering from deflation in another area.
It's really really hard to judge what will happen. We're in the midst of a big experiment.
that's less velocity. The employer keeps that money, and if it's because of less sales then it's because someone else kept their money. Right now velocity is dropping. The number of dollars stays the same in a lost job scenario.
True, but I am looking at it in a simplified way by only talking about one individual here instead of looking at the whole economy's money supply. Makes reasoning about consumer price inflation easier for me, as an employer would usually not use the money for their own grocery shopping anyway.
It's less money available to the individual who has lost their job in this example. That may of course be caused by less velocity. Or it may be caused by a business closing down defaulting on their loans which actually shrinks overall money supply in the economy.
The resulting effect on prices is likely going to be the same anyway (in the short run).
It remains to be seen whether lower velocity will keep being the only deflationary driver over the long run. If businesses default en masse, then I think we will see real money supply deflation.
So yes, if people don't move (less velocity) and if less money is available (lost job), then that will be deflationary. This effectively yields lower demand. At the same time, if less supply is available, that's inflationary.
Now, good luck at predicting how supply and demand will behave, especially if you add more money to the game.
For example, it could happen that if the crisis ends faster than anticipated, too much money has been injected into the economy and demand picks up much faster than projected. This would be highly inflationary, especially if you add a drop in supply simultaneously (more money chasing less goods).
On the other hand, it may happen that regardless of how much money you add, people are just not going to spend it, because they can't (low velocity). Then you might end up with deflation anyway, conclude that you should add even more money, and eventually end up in the scenario described above.
Too make it even more complex, you might end up with inflation in one class of goods and deflation in another at the same time. Looking at a broader picture by including not only consumer goods, you might for example inflate an already existing asset bubble (housing) even more, while simultaneously suffering from deflation in another area.
It's really really hard to judge what will happen. We're in the midst of a big experiment.