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

Energy infrastructure, Energy Infrastructure: Electricity is one of th...

Energy Infrastructure: Electricity is one of the main determinants of the quality of life. In India, the power sector has not kept pace with the growth in demand resulting in

Consumer Price Index, What is the formula for consumer price index?

What is the formula for consumer price index?

Economics, The Neoclassical thinking that assumes that all firms are establ...

The Neoclassical thinking that assumes that all firms are established with the intention of making profit has been challenged by the managerial discretion models. How successful ha

Set up a diagram.., (a) Use this information to set up a diagram showing th...

(a) Use this information to set up a diagram showing the firm''s total revenue and total cost schedules. In this diagram, show the points at which the firm is maximizing profits.

Consumption, Consider two consumers, A and B. A and B both want perfect con...

Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different income streams.

What is the monopole and dipole moment, Charge is distributed with constan...

Charge is distributed with constant volume density D throughout the rectangular box with length a, width b and height c.  a) what is the monopole moment of this system. b) What i

Why gdp is determined only by aggregate demand, Q. Why GDP is determined on...

Q. Why GDP is determined only by aggregate demand? Note that we haven't said anything about the aggregate supply so far. In order to justify why GDP is determined only by aggre

Equilibrium interest rates, I am in a college econ class that I may possibl...

I am in a college econ class that I may possibly fail. anyone able to explain how to find this answer? Assume that the following data characterize the hypothetical economy of Tran

Exam, real gdp measures?

real gdp measures?

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