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There several things that happen when the government increases the money supply. This may cause inflation as there will be more money in the market than goods.
The supply of money IS controlled by the central bank. However, in some countries the politicians interfere with the Central Bank.
when money supply is increased, interest rates decrease
loose money policy
In economics the supply of money is its quantity. The supply of money in-turn is complementary to the demand for it. In monetary policy Central Banks can increase the quantity of money to create market stimulation for example.
When banks make loans, the money supply increases, since the people who receive these loans will have more money.
increases money supply
There several things that happen when the government increases the money supply. This may cause inflation as there will be more money in the market than goods.
Discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), to contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate.
The supply of money IS controlled by the central bank. However, in some countries the politicians interfere with the Central Bank.
when money supply is increased, interest rates decrease
loose money policy
Money supply is determined exogenously by the monetary authority usually central bank of a country.
In economics the supply of money is its quantity. The supply of money in-turn is complementary to the demand for it. In monetary policy Central Banks can increase the quantity of money to create market stimulation for example.
In general, increasing the money supply will decrease interest rates. Intrest rates reflect the amount paid for the use of money. As the money supply increases, money becomes relatively less scarce and easier to obtain. As with any other good as the supply increases, while demand remains constant, the price will fall. In this case the price of money is the interest rate.
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.
Monetary policy