Respuesta :
If the money supply increases more quickly than economic growth under generally normal economic conditions, inflation may result. Inflation, or the rate of average price rises over time, can be influenced by variables other than the money supply.
Does the money supply have a direct impact on the economy?
The amount of money available in the economy and the pricing at which products and services are sold are directly correlated. The market situation makes it evident that if we increase the money supply on the left side of the equation, the average price level will rise at a corresponding rate.
What causes an economy's money supply to grow?
The total amount of reserves in a bank rises with each dollar deposited into an account. The bank will lend out the extra reserves while keeping some of the necessary reserves on hand. The money supply is increased when such loan is made. Banks "generate" money in this way to expand the available supply.
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