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    Chapter 30 Money Growth and Inflation - Some Logics

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    Minh Châu Tạ Thị
    The document discusses how central banks inject money into the economy through bond purchases. This increases the amount of currency in circulation and the deposits in banks. Higher currency leads to more spending on goods, services, and corporate bonds, increasing demand. Higher deposits allow for more bank lending and business spending on investment goods. However, supply does not increase, leading to higher prices as more money is needed for each transaction, fueling monetary demand and inflation. The key points are that central banks use bond purchases to increase the money supply, which can cause inflation by raising demand without impacting supply.

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    Chapter 30 Money Growth and Inflation - Some Logics

    Uploaded by

    Minh Châu Tạ Thị
    43 views1 page
    The document discusses how central banks inject money into the economy through bond purchases. This increases the amount of currency in circulation and the deposits in banks. Higher currency leads to more spending on goods, services, and corporate bonds, increasing demand. Higher deposits allow for more bank lending and business spending on investment goods. However, supply does not increase, leading to higher prices as more money is needed for each transaction, fueling monetary demand and inflation. The key points are that central banks use bond purchases to increase the money supply, which can cause inflation by raising demand without impacting supply.

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    The document discusses how central banks inject money into the economy through bond purchases. This increases the amount of currency in circulation and the deposits in banks. Higher currency leads to more spending on goods, services, and corporate bonds, increasing demand. Higher deposits allow for more bank lending and business spending on investment goods. However, supply does not increase, leading to higher prices as more money is needed for each transaction, fueling monetary demand and inflation. The key points are that central banks use bond purchases to increase the money supply, which can cause inflation by raising demand without impacting supply.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    43 views1 page

    Chapter 30 Money Growth and Inflation - Some Logics

    Uploaded by

    Minh Châu Tạ Thị
    The document discusses how central banks inject money into the economy through bond purchases. This increases the amount of currency in circulation and the deposits in banks. Higher currency leads to more spending on goods, services, and corporate bonds, increasing demand. Higher deposits allow for more bank lending and business spending on investment goods. However, supply does not increase, leading to higher prices as more money is needed for each transaction, fueling monetary demand and inflation. The key points are that central banks use bond purchases to increase the money supply, which can cause inflation by raising demand without impacting supply.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    Xuan Lam, Nguyen

    The logic of monetary injection

    CB injects money into the economy by buying government bonds and paying money
     Some of these money are held as currency → ……

    for the public → 
     Some are deposited in banks → ……

    On the one hand,


     Buy g & s 
     
    Cu ↑ → 
    
     Buy corporate bonds → Spending on I
      → Demand for g & s ↑ (1)


    D ↑ → Loans ↑ → Spending on I 

    On the other hand,

    Cu ↑
    → MS ↑ but not altering A, L, K, H, N → A. F(L, K, H, N) = Y
    D↑

    → Supply of g & s unchanged (2)

    1
    (1) & (2) → P ↑ → ↓ → People need more money for every transaction → MD ↑
    P

    Remarks:

    1. The quantity of money (M = Cu + D) in an economy determines the value of


    1
    money   .
    P
    2. Growth in the quantity of money (Cu + D = M ↑) is the primary cause of
    inflation (P ↑).

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