What is money supply and how it is related to inflation? 2.What is the relationship between...
- What is money supply and how it is related to inflation?
2.What is the relationship between classical dichotomy and monetary neutrality?
- What is hyperinflation? List a country that has experienced hyperinflation more recently?
- How the nominal interest rate and inflation rate are related
Homework Answers
1) In simple words, money supply is the total amount of money in circulation or in existence in a country. DescriptionThe money supply is the total value of money available in an economy at a point of time. There are several ways to define "money", but standard measures usually include currency in circulation and demand deposits. The money supply is all the currency and other liquid instruments in a country's economy on the date measured. The money supply roughly includes both cash and deposits that can be used almost as easily as cash.
Relation with inflation:
Increasing the money supply faster than the growth in real output
will cause inflation. The reason is that there is more money
chasing the same number of goods. Therefore, the increase in
monetary demand causes firms to put up prices.
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What is money supply and how it is related to inflation?
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