Macro Economics: Money and Growth
Not what you're looking for?
Please help with the following problem. Provide at least 200 words in the solution.
I used to think that for growth to take place, banks had to lend out more than they had (fractional reserve, credit) and that this would lead to an increase in aggregate demand and production. Apparently, however, if velocity of money increases we can also have growth. Does this mean that if the money supply never increased (credit via banks stopped altogether) that the aggregate demand and subsequent growth to meet that demand could still occur?
Purchase this Solution
Solution Summary
This solution discusses money supply and growth. The explanation is given in 241 words.
Solution Preview
If the money supply is never increased, the aggregate demand curve will not grow. Aggregate demand increases with an increase in money supply because with an increased supply of money, people have more money to spend and banks have more money to lend at a lower interest rate.
Velocity can be defined as the rate at which money changes hands. If the velocity is high, money changes hands ...
Education
- BCom, SGTB Khalsa College, University of Delhi
- MBA, Rochester Institute of Technology
Recent Feedback
- "Thank you. "
- "Thank you"
- "Thank you. I got 20/20 last week for my discussion you help me out with."
- "Thank you. Great Job. "
- "Thank you. Great Job. "
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.