Asked in Economics
What effect does an increase in the money supply have on inflation?
An increase in the money supply shifts the money supply curve to the right. If you look on your graph, you will see that an increase in money supply will cause the interest rate to decrease. Here's why: Fed increases money supply-->excess supply of money at the current interest rate -->people buy bonds to get rid of their excess money-->increase in the prices of bonds --> decrease in the interest rate. ...
Asked in Inflation
If there is an increase in the money supply that causes prices to rise and leads to inflation what happens to money?
If there is a increase in money supply that is causing price to rise money only does one thing. The money that is taking is used for supply. ...
Asked in Banking, Economics, Inflation
Will increase in nominal money supply increase real money supply?
No because real money supply would only increase if the price level doesnt increase or increases at a slower pace than the increase in nominal money supply. This is because the real money supply takes into account the current price level. ...