Expansionary monetary policy is usually engaged in two ways. The central bank will lower the prime rate and the government can print more money. Generally this is done to stimulate the economy. You achieve more money in the economy so that there are more jobs created and the money goes around and around to increase the GDP. At some point this goal is overachieved. There will be too much money going around and around and that results in too much money chasing too few goods. You then have inflation as people bid up the price of goods. The central bank then has to do the opposite and raise interest rates and stop printing more money. One other monetary tool is to lower and raise taxes but in America the voters only want taxes to go down.
well yes and no its good to have money to save so you can spend later but too much money can breed greed
Too much.
too much
Too much.
Inflation is too much money chasing too few goods and services; in 1946, there was a lot of pent-up demand following the Depression and WW II, and lots of money that had been saved during WW II because there was nothing to spend it on.
Inflation is too much money chasing too few goods. If the new revenue from raising taxes is used to pay down debt, raising taxes can help control inflation by reducing discretionary income.
Inflation is too many dollars chasing too few goods. It happens when the money supply is variable and the cost of borrowing from commercial lenders (1. federal reserve) is too low.
In economic terms, it is scarcity.This is what drives inflation. The more money in the economy, the less it is worth. Consequently, as the value of the dollar goes down, the price of everything goes up. This is what is called an inverse relationship.
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Essentially, it is too much money chasing too few goods or services. The causes of the excess of available money and the shortages of a good or service are almost limitless but some of them are; the government prints too much money, too much credit is available (This is more the problem in the recent past - credit cards alone have created more money than any gov't.). A sudden change in society ( A fad, a disaster or financial manipulation, for example) can create an excessive demand for a product or service.
Inflation.
Hyperinflation.
Inflation at its core is a monetary problem. It is simply too much money chasing too few goods. The father of this theory is Milton Friedman (see link below).Rapidly rising production costs
Hyperinflation.
inflation
One of the two (according to the Keynesian) reason that can create high inflation is attributed to the increased money supply where "too much money chasing too few goods" Therefore, to reduce inflation, the Federal reserve would want to DECREASE the money supply. However, the increase in money supply can create stimulus demand and depreciate the exchange rate of the US Dollars which are considered (although questionable) beneficial to the US economy.