Money supply and inflation are closely linked in an economy. They affect how stable prices are and how the economy grows. This paper looks at how changes in money supply can lead to inflation. It uses different economic theories and also explains the role of monetary policy. First, it explains what money supply and inflation mean. Then it discusses three main theories: Quantity Theory of Money, Keynesian theory, and Monetarist theory. Each theory explains the link between money and prices in a different way. The study also shows how money supply changes affect the economy. It can change demand, interest rates, investment, and spending by people. In the end, it affects the general price level. Central banks are also important. They try to control inflation using tools like interest rates, open market operations, reserve requirements, and control of money supply. Some real examples are also given. Countries like Germany, Zimbabwe, the United States, and Argentina show different inflation results based on money supply conditions. The article also briefly mentions that future changes in finance and global trade may affect monetary policy. In conclusion, most theories agree on one point. If money supply grows too fast compared to goods and services, prices go up. So, good control of money supply is important. It helps keep prices stable and supports long-term economic growth.
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- Citation du texte
- Anonymous (Auteur), 2026, How money supply influences inflation. An economic theory approach, Munich, GRIN Verlag, https://www.grin.com/document/1745930
