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Given that money supply (and money base) in an economy increases as companies borrow from banks, does a decrease (or increase) in oil prices not affect the growth of an economy. - if the price of oil goes down, won't companies borrow less to expand , thereby allowing less new money to be created?

Alternatively, if oil prices increase, won't companies need to borrow more thereby creating more money than before (through loans)?

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Solution Summary

Discuss money supply (and money base) in an economy.

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Umut Oltulu, MBA
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  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
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