Demand and Supply of Money
Supply of Money Like any other market, demand and supply of money will interact to produce an equilibrium price of money. The graph below shows the supply and demand for money. The money supply (MS – M/P) is vertical since…
Money Creation Process
The money creation process is very helpful in understanding the role of money in the economy. The strength of money creation is influenced by the amount kept in the bank as a reserve for meeting customers’ withdrawal requests. Banks usually…
Function and Definition of Money
Definitions of Money According to Growther, money refers to anything that is generally accepted as a means of exchange. What’s more, it is that which at the same time acts as a measure and store of value. John Maynard Keynes…
Comparison of Monetary and Fiscal Policy
Monetary policy and fiscal policy refer to government policies and tools used to control macroeconomic variables and financial markets. Whenever economic activities start to slow down, these tools are used to accelerate growth. Similarly, when the economy starts to overheat,…
Cost-push and Demand-pull Inflation
Cost-push Inflation Aggregate supply is the total amount of goods and services produced by an economy at a given price level. Cost-push inflation is attributed to a reduction in the aggregate supply caused by a rise in the cost of…
Construction of Indices Used to Measure Inflation
Since inflation is impactful on the general price level of an economy, it is tantamount to measure inflation using a price index. As such, it is important to understand how a price index is modeled so that inflation rates derived…
Inflation, Hyperinflation, Disinflation and Deflation
Inflation Inflation is the persistent increase in the general price level of goods and services in an economy over a given period of time. Fewer goods and services are bought when price levels rise hence the reduction in purchasing power….
Measures and Types of Unemployment
Unemployment happens when individuals who are capable and willing to work at the current wage rates cannot acquire jobs. Similarly, when there are few available jobs in an economy, and yet the labor force of that economy is growing, then…
Theories of the Business Cycle
Various economists have formulated several theories in a bid to try and demystify the concept of business cycle. 1. Models With Money Inflation is often considered a consequence of the business cycle. When monetary policy becomes encouraging, the economy grows…
