Money itself, as it is used in today, is an idea only. When money isn't backed by something solid it is less valuable than previously and causes things to cost more because of the lack of solidity of the money as it is only an idea and everyone is trying to capture the idea and make it concrete. Perhaps also because if there is more money in circulation in theory people have more money to spend, therefore they can afford to spend more.
money circulation is main reason for the inflation. when money supply is increases then investments are also going to increases, employment rises, output rises, consumption increases, demand is also rises for the goods when demand rises, prices of goods is rises finally its leads to INFLATION..
From, Madhu..
The equation MV = PT.
M = money supply V = velocity of money P = price level T = transactions
Therefore,
P = MV / T
There is nearly a perfect, 1:1 relationship between inflation and the money supply. Generally, printing more money is the source of inflation.
modern measure of money
There is nearly a perfect, 1:1 relationship between inflation and the money supply. Generally, printing more money is the source of inflation.
macro
Inflation
Due to inflation the money value goes up ,people have more demand but they don't have supply so as it leads to high price of commodity, its the picture of inflation. So avoid this the better way to produce more to set a link between demand and supply.
Decreasing the money supply. Monetary policies are concerned with the increase or decrease of the money supply.
M. Thomas Paul has written: 'A re-examination of the long run relationship between money supply and inflation in India' -- subject(s): Inflation (Finance), Money supply
The monetarist explanation of inflation operates through the Quantity Theory of Money, MV = PT where M is Money Supply, V is Velocity of Circulation, P is Price level and T is Transactions or Output. As monetarists assume that V and T are determined, by real variables, there is a direct relationship between the growth of the money supply and inflation. ChaCha again!
The relationship between inflation and recession is that a recession will cause inflation to go down. The reason for this is due to their being less money being spent due to the recession.
There is nearly a perfect, 1:1 relationship between inflation and the money supply. Generally, printing more money is the source of inflation.
macro
Inflation
the main cause of inflation is the growth of money supply
inflation
inflation
no...it will create inflation
by controlling growth of money supply
Due to inflation the money value goes up ,people have more demand but they don't have supply so as it leads to high price of commodity, its the picture of inflation. So avoid this the better way to produce more to set a link between demand and supply.