Inflation was origin by a combination of four factors. Those
factors are:
• The supply of money goes up.
• The supply of goods goes down.
• Demand for money goes down.
• Demand for goods goes up.
You should think that the demand for money could be
infinite. Who doesn't want more money? The key thing to keep in mind is that
wealth is not money. The collective demand for wealth is unlimited as there is
never sufficient to satisfy everyone’s desires. Money, as defined in "How
much is the per capita money supply in the U.S.?" is a narrowly described
term which adds things like paper currency, traveler’s checks, and savings
accounts. It doesn't add things like stocks and bonds, or forms of wealth like
homes, cars and paintings. Since money is only one of various forms of wealth,
it has bounty of substitutes. The interaction between money and its alternates
explain why the demand for money changes.
We'll look at a few issues which can cause the demand for
money to change. Two of the more significant stores of wealth are bonds and
money. These two items are alternates, as money is used to purchase bonds and they
are redeemed for money. The two differ in a few ways. Money usually pays very
little interest (and in the case of paper currency, none at all) but it will be
used to purchase services and goods. Bonds do pay interest, but will not be
used to make purchases, as the bonds have to be converted into money. If bonds
paid the similar interest rate as money, nobody could purchase bonds as they
are less convenient than money. Since bonds give interest, people can use some
of their money to purchase bonds. The higher the interest rate, the more striking
bonds become. So a rise in the interest rate sources the demand for bonds to
rise and the demand for money to fall since money is being replaced for bonds.
So a fall in interest rates causes the demand for money to go up.
Many online experts can provide microeconomics assignment help and there are many experts for many subject’s assignment help in many
other subjects.
Comments
Post a Comment