Explain money market with inflation, Macroeconomics

Assignment Help:

Q. Explain money market with inflation?

The money market with inflation 

Let's begin with the money market diagram and introduce inflation. As MD relies positively on P, MD curve to 'glide' out towards the right when inflation is positive and toward the left when we have deflation. 

223_Explain money market with inflation.png

Figure: The money market with inflation and constant money supply

If money supply is constant, nominal interest rate would continuously increase when we have inflation and continuously decrease when we have deflation. 

An interesting special case is when money supply increases by same rate as P. In this case, money supply curve would also glide outwards or inwards (depending on whether we have deflation orinflation) at exactly the same rate as money demand. Nominal interest rate will then be constant.


Related Discussions:- Explain money market with inflation

What are UN millennium development goals, What are UN Millennium Developmen...

What are UN Millennium Development Goals? The UN Millennium Development Goals (MDGs): These are a set of objectives shared through the IMF, the OECD and the World Bank (WB)

Liberalisation and changing sources of fdi, Liberalisation and Changing Sou...

Liberalisation and Changing Sources of FDI: European countries  had been major sources of FDI inflows  to India until 1990. However, their relative importance declined in the

Trade-fdi nexus, Trade-FDI Nexus: Economic liberalization promotes bot...

Trade-FDI Nexus: Economic liberalization promotes both trade and FDI. FDI could be export-promoting, import substituting or import enhancing depending upon supply and demand f

Gross domestic production, why is imports subtracted from the expenditure a...

why is imports subtracted from the expenditure approach

Nations total income, If you take nations total income and subtract out pri...

If you take nations total income and subtract out private consumption government consumption what you will find?

Money market with inflation and rising money supply, Q. Money market with i...

Q. Money market with inflation and rising money supply? Figure: The money market with inflation and rising money supply If we let π M refer the growth rate in money

Which of the following statements is correct, Which of the following statem...

Which of the following statements is true? a. economic profit equals accounting profit minus implicit costs b. the short run is any period of time in which there is at least

Branches and development of macroeconomics, compare and contrast the moneta...

compare and contrast the monetarism economics and the keynesian economics

Give detail explanation of exchange rate, Give detail explanation of Exchan...

Give detail explanation of Exchange Rate In most countries, exchange rate is expressed using foreign currency as base currency. For instance, in Denmark, USD exchange rate woul

Comparative advantage in wheat, In The No-Trade Equilibrium Stormlands: W...

In The No-Trade Equilibrium Stormlands: WageL = 24 WageW = ? MPLL = 4 MPLW = ? PL = ? PW = 4 Reach: Wage*L = ? Wage*W = 6 MPL*L = ? MPL*W = 1 P*L = 3 P*W = ? (a) Which

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd