- PPF Points
- 7,646
Money is essentially good, so as such is ruled by the hypotheses of supply and demand. The value of any good is determined by its supply and demand and the supply and demand for other goods in the economy. A price for any good is the amount of money it takes to get that good. Inflation occurs when the price of goods increases—in other words when money becomes less valuable relative to those other goods. This can occur when:
The supply of money goes up.
Demand for other goods goes up.
The supply of other goods goes down.
Demand for money goes down.
The key cause of inflation increases in the supply of money. Inflation can occur for other reasons. If a natural disaster destroyed stores but left banks intact, we would expect to see an immediate rise in prices, as goods are now infrequent relative to money. These kinds of situations are rare. For the most part, inflation is caused when the money supply rises faster than the supply of other goods and services.
In contrast to directly used consumers' or producers' goods, money must have pre-existing prices on which to ground a demand. But the only way this can happen is by beginning with a useful commodity under barter, and then adding demand for a medium to the previous demand for direct use (e.g., for ornaments, in the case of gold). Thus the government is powerless to create money for the economy; the process of the free market can only develop it. Price action guide is essential if you are thinking to invest your valuable money in forex.
Money has value because people believe that they will be able to exchange this money for goods and services in the future. This belief will persist so long as people do not fear future inflation or the failure of the issuing agency and its government
The supply of money goes up.
Demand for other goods goes up.
The supply of other goods goes down.
Demand for money goes down.
The key cause of inflation increases in the supply of money. Inflation can occur for other reasons. If a natural disaster destroyed stores but left banks intact, we would expect to see an immediate rise in prices, as goods are now infrequent relative to money. These kinds of situations are rare. For the most part, inflation is caused when the money supply rises faster than the supply of other goods and services.
In contrast to directly used consumers' or producers' goods, money must have pre-existing prices on which to ground a demand. But the only way this can happen is by beginning with a useful commodity under barter, and then adding demand for a medium to the previous demand for direct use (e.g., for ornaments, in the case of gold). Thus the government is powerless to create money for the economy; the process of the free market can only develop it. Price action guide is essential if you are thinking to invest your valuable money in forex.
Money has value because people believe that they will be able to exchange this money for goods and services in the future. This belief will persist so long as people do not fear future inflation or the failure of the issuing agency and its government