Question

If the US Economy would rise in funds if the economy grew more rapidly then other countries. Meaning we would have more investments from other countries to expand their business on imports. Overall we would get access to more funds with a lower interest rate. There will be an increase in number of jobs, with that prices will overall be higher. For example the cost of living but if this were the case it should be more affordable to own a house.
how would you reply to this

Answer 1

If money supply generates more in us economy, then initially the productive capacity of the country will rise. With rise in money supply , interest rate will fall.it will attract more investment. So the number of jobs will be more. At the same time (from quantity theory of money) the rise in money supply will raise the price level. So the cost of living will be higher. But the real estate market will not be affected by the rise in cost of living. Generally we can see, that price of house starts falling, once it's supply exceeds its demand. So people with higher income will afford more houses.