The relationship between money supply and inflation

The relationship between money supply and inflation Introduction The current globalisation rate has led to many changes and effects on the value of most resources and especially the financial resources. The world’s population is increasing at a fast rate while on the other hand resources are being depleted without being replenished thus causing scarcity.Advertising We will write a custom essay sample on The relationship between money supply and inflation specifically for you for only $16.05 $11/page Learn More As a result, economic crisis have occurred which have as well affected the living standards of a better part of the world’s population (Hardwick, 2002, p.176). Among the common effects are the high inflation and the amount of money supplied. Economists have however established the rate of Inflation and the money supply of a nation are correlated with one leading to another. This paper is therefore an analysis of the relationship between the inflation rate and money supply. Inflation Inflat ion is said to be the increase in the prices of commodities and services in a given economy. This makes the people buy less since their purchasing power goes down as a result of the lower value of the currency. Inflation rates of most countries keep fluctuating but their central banks try to keep the rates at a range of about two to three percent. The consumer price index is what is used to measure the inflation rates of an economy. It has been theoretically argued that inflation is caused by an increase in money supply in the economy (Hall and Taylor, 1997, p.637). Money Supply Money supply is an economic term which refers to the amount of money circulating in an economy. The central bank is bestowed with controlling the money supply of a country through regulation of the circulation (Williams, 2008, p.1). Money supply can be measured by looking at the value of currency, bills, credit, loans as well as other liquid instruments in an economy. The Relationship between money supply an d inflation Economists have suggested that there is a high degree of correlation between the inflation rate and money supply in an economy. To begin with is the fact that when the money supply is high the demand for money goes down.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This is because people are able to afford even the high priced commodities and services that they could not have initially afforded (Mishkin, 1995, p.89). It can thus be depicted that an upward supply of money in the economy results to inflation according to the graph shown below. (McMahon, 2009, p.1) A look at the graph at first glance does not show any instances of correlation however after the introduction of a time lag in which the two occur a situation of relationship is then established. This time lag is the difference in time between changes in the money supply and the changes in the inflation rat es. Thus, the relationship occurs after a period of time as it can be depicted on the graph in the years 1990, 1996, 2000 and 2001 among others. This can be practically explained in a situation whereby the people of a given small town are given the opportunity to raise a higher income than they would have before in a month. They would thus shift from using gasoline to gas as their source of fuel which costs higher. This is because in real sense, the gas will cost proportionally lower than the price they were paying for gasoline before the increase in income. As a result, the market will bear high prices for commodities and services leading to inflation which has come about due to increased money supply (Williams, 2008, p.1). The relationship between inflation rates and money supply can be differently explained using different economic theories. The Monetary theory explains that money supply is the most significant factor that leads to incidences of inflation in an economy.Advertisin g We will write a custom essay sample on The relationship between money supply and inflation specifically for you for only $16.05 $11/page Learn More Quoting the words of a renowned monetarist by the name Milton Friedman, he said, â€Å"Inflation is always and everywhere a monetary phenomenon† (Williams, 2008, p.1). Thus according to empirical studies conducted by most historical monetarists, it can be asserted that inflation is a monetary phenomenon. This is in accordance to the equation; MV= PQ Where; M is the nominal value of money (money supply) V is the money velocity P is the price level Q is the real value index (Transactions) From the above equation, monetarists argue that the money velocity is not affected by changes in the money supply in the long-run (Mankiw, 2002, p.153). Therefore the output is highly dependent on the productivity of the economy.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Working with these assumptions it can be said that changes in price are dependent on the changes in the quantity of money in the economy thus the money supply. The chart below derived from the above equation shows the differences in inflation reflected by CPI and the money supply reflected as M2. Fig. A chart showing the relationship between inflation and money supply (Burda and Wyplosz, 1997, p. 267) According to the Keynesian theory, there still exists a relationship between money supply and inflation. However, they argue that money supply is not the only big factor that causes inflation as there are also other contributing factors. The Keynesians emphasize that aggregate demand is the main reason behind inflation and thus regulating the aggregate demands in periods of recessions and economic expansions helps stabilize the inflation rates as well. Nevertheless, the relationship comes about as aggregate demand is effectively controlled using economic instruments such as monetary p olicy and fiscal policy (Burda and Wyplosz, 1997, p. 275) Conclusion From the above discussion, it can be concluded that there is indeed a great correlation between money supply and inflation rates of an economy. It is evidenced that changing the money supply through the central banks leads to a control of the inflationary situations in the same economy. For instance, a country with high inflation rates and willing to lower them, they will do this through the operations of the central bank whereby the lending rates and the interest rates will be increased to reduce the amount f money leaving the bank (Baumol and Blinder, 2006, p.109). As a matter of fact, people will rush to deposit the cash they have so that it can earn as much interest as possible. This will in turn reduce the amount of money circulating in the region hence reducing the inflation rates as well. In a situation of deflation the vice versa will be applied where the central bank will reduce the lending rates and inter est rates so as to enable flow of money into the economy (Baumol and Blinder, 2006, p.109). The control between money supply and inflation rates is thus operated using the federal banking system of the central bank of the region. Reference List Baumol, W. and Blinder, A. (2006). Macroeconomics: Principles and Policy, Tenth edition. Thomson South-Western. Burda, M. and Wyplosz, C. (1997). Macroeconomics: a European text. Oxford [Oxfordshire]: Oxford University Press. Hall, R. and Taylor, J. (1993). Macroeconomics. New York: W.W. Norton. Hardwick, P. (2002). Introduction to modern economics, prentice hall publishers, New York. Mankiw, N. (2002). Macroeconomics (5th Ed.). Worth. McMahon, T. (2009). Money Supply and Inflation. Available from https://inflationdata.com/inflation/Inflation/Money_Supply_and_Inflation.asp . Mishkin, F. (1995). The Economics of Money, Banking, and Financial Markets, New York, Harper Collins. Williams, J. (2008). Money Supply Special Report. Available from   shadowstats.com/article/money-supply .

Icicle, Another Good Word Down the Tubes

Icicle, Another Good Word Down the Tubes Icicle, Another Good Word Down the Tubes Icicle, Another Good Word Down the Tubes By Maeve Maddox I became aware of what is happening to the lovely word icicle when I read a poem in which it was spelled ice sickle. There was nothing in the context to suggest that the poet intended a pun. A web search showed me that theres a comic book character called Ice Sickle. Numerous clever photographers have posted pictures of icicles shaped like sickles and tagged them ice sickle. Many of the thousands of hits on ice sickle certainly refer to the comic book character or are deliberate punnings. However, as is inevitable when pop culture gets hold of a pun, its not long before the original word falls into obscurity. Hi. I installed gutter toppers on my eaves this summer†¦.How should I hang my strands on ice sickle lights being that the toppers are now in the way? Thanks! Reverse Ice Sickle in my dogs water bowl. I took this picture [this] morning. †¦ It is shaped like a triangle at its base. Pictures and albums about Icesickles published in outdoors Black and white ice sickles on my front porch after all the snow started to melt and refreeze. (Note: The photo shows standard icicles.) For those who may not be familiar with the standard meanings, here are some definitions from the OED: sickle: a. An agricultural implement similar in form and use to a reaping-hook, but properly distinguished from this by having a serrated cutting-edge. Figuratively, something having the curved or crescent form of a sickle†¦ icicle: A pendent ice-formation resembling a rod tapering downward to a point, produced by the freezing of successive drops of water falling or trickling from the point of attachment, as from the eaves of a house or other overhanging point. Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Spelling category, check our popular posts, or choose a related post below:50 Slang Terms for MoneyList of Greek Words in the English LanguageEducational vs. Educative

Scientific Method Essay Example | Topics and Well Written Essays - 500 words - 1

Scientific Method - Essay Example According to a survey conducted by American farm policy as documented by Blatt (2008), the increase in obesity in the American society is not caused by eating more food, but by eating more processed food instead of fresh farm produce. As outlined by Deutsch (2010) most Americans obtain their food supplies from supermarkets and grocery stores and it is important to establish whether they just prefer processed food, or there is reduced availability of fresh farm produce. The following study will conduct a survey on three supermarkets on the quantity of processed foods in kilograms and compare them with the quantity of processed foods in kilograms. The three grocery stores were visited from 1pm to 2pm on 1st and 2nd which was on Thursday and Friday Most Americans buy their weekly supplies during weekends and a previous inquiry from the managers revealed that by Thursday and Friday they are always fully stocked in readiness for the weekend shoppers. The study employed the services of two high school teenagers who went to two grocery stores while the researcher personally went to one store. The researchers were supposed to visit the grocery section of both processed and fresh cereals and then record the quantity of foodstuffs in each section in kilograms. They researchers were provided with scientific calculators to convert units that were not in kilograms to kilograms. The researchers were also given excel sheets (sample provided in Figure 1) with separate sections for processed and fresh foods. Each section had provisions for recording the type of cereal and the quantity in kilograms. After the collection of data, the data was computed and presented in a percentage form to show which type of cereals had the highest percentage and whether the difference was significant. Percentages for each grocery store was also computed to

Dunkle v. State, 2006 Okla. Crim. 29, 139 P.3d 228, 2006 Okla. Crim Assignment

Dunkle v. State, 2006 Okla. Crim. 29, 139 P.3d 228, 2006 Okla. Crim. App. Lexis 29 (2006), - Assignment Example Character evidence was used in the court for the purpose of proving action and computer-generated crime scene re-enactments were used to persuade the jury that the state’s version were consistent with evidence at the scene and the defendant’s was not. Based on this, Dunkle was convicted of first degree murder. Dunkle has now appealed for her sentence and conviction. The issue is whether, by using improper character evidence, the appellant was denied of a fair trial. It is to be seen if character evidence provided is relevant and admissible in the court of law. Another issue is whether the computer-generated re-enactments are actual images of the crime or a set of possibilities. Previously, the Court had convicted Dunkle of first degree murder, but the decision has now been reversed and the case has been remanded for a new trial. It was found that there were reversible errors in admitting of computer-generated reconstructions and, irrelevant and inappropriate character evidence. The previous court had decided that the character evidence showcased and the evidence from computer-generated re-enactments were sufficient to prove that Dunkle had committed the crime and hence was convicted of first degree murder. But this court is of the opinion that evidence is insufficient to justify the decision. The court came to this conclusion as most of the arguments of the State were directed towards establishing that Dunkle had a bad character and a person who would kill someone but there was no attempt made to establish an apparent motive for the crime. The majority of the character evidence presented was irrelevant to the murder charge. And with respect to computer-generated re-enactments, the evidence only proves that defendant’s version is not consistent with the evidence at the scene but in no way proves the claim of the state that the

US criminal justice Essay Example | Topics and Well Written Essays - 1750 words

US criminal justice - Essay Example Before going into the discussion regarding affect of one’s opinion about the purpose of sentencing on selecting the most appropriate type of punishment, let us get a better understanding of what sentencing actually is.Sentencing is a stage in criminal justice system in which a judge decides a punishment for a criminal. The purpose of sentencing plays a very critical role in deciding the most suitable type of punishment because it makes a judge decide whether to satisfy the victim or to punish the offender according to the law. The judges, however, can make the decision on their own in a very few situations because they have to look at the punishment which is set in the law for any specific crime. The way the juries make a decision against criminals has been continuously changing with time (Renter). For some crimes, there are laws, which apply fines and banishment for the criminals whereas for some crimes, there are very harsh punishments set for the criminals. â€Å"Today the re are many things the criminal justice system aims to do by imposing punishments and sentences† (Renter). One’s belief in the purpose of sentencing plays a crucial role in reducing the crime rate from a country. In the US criminal justice system, the aim of the judges is to reduce the crime by sentencing the criminals on merit. The goal should be to make the criminals refrain from crimes by giving law-based punishments to the criminals. Some judges believe that sentencing should be a way to stop the criminals from committing crimes by giving harsh punishments to the criminals whereas others believe that sentencing should also involve will of the victims in order to satisfy the victims properly. Therefore, one’s belief about the purpose of sentencing plays a critical role in deciding appropriate punishments for the criminals. Answer: No: 2 Some of the most famous sentencing models in the United States include indeterminate sentencing, determinate sentencing, and mandatory sentencing. Indeterminate Sentencing In indeterminate sentencing, the judges state a minimum and maximum length of imprisonment for the criminals depending on the nature of the crime committed by them. It is the most widely used sentencing model in the United States of America (Siegal 498). The minimum time of imprisonment is must for all criminals whereas the maximum time depends on some specific circumstances. The model gives power to the judges to decide the number of years for the imprisonment of the criminal by providing the judges with both limits for the years of imprisonment. Indeterminate sentencing provides range and flexibility to the judges by giving them the power to decide the appropriate duration for imprisonment of the criminals. Determinate Sentencing Determinate sentences are fixed terms of incarceration in which the offender has to spend a specific number of years in the prison. In determinate sentencing, there is a set of guidelines for the judges that define the parameters to be followed while deciding the sentences. For rehabilitation purposes, determinate sentencing model is too restrictive as compared to indeterminate sentencing. A good thing about the determinate sentencing model is that the offender keeps in mind the punishment for any specific crime and hesitates to commit the crime and go back to jail for anther term of imprisonment. Mandatory Sentencing Another type of sentencing model is mandatory sentencing in which a judge has to give a mandatory punishment to the criminal because in this model of sentencing, a judge has little or no control over the punishment set for any specific crime. Mandatory sentencing restricts sentencing disparity and limits individualized sentencing by limiting the discretionary power of the judges to impose any kind of disposition. Mandatory sentencing has helped the government of the United States reduce the overall number of crimes by incarcerating the offenders who might have

Taxation System in the New York Assignment Example | Topics and Well Written Essays - 750 words

Taxation System in the New York - Assignment Example Since his daughter furnished the apartment using his property, he would have to pay all the property taxes for the furniture. In 2009, the taxpayer also visited his regular doctor and traveled by taxi to and from JFK airport. The hotel expenses would also add to the amount of money he would have had to pay as taxation. In 2010, the taxpayer was in New York for an additional 47 days but returned home in September that year. For the time up to September, his salary would be subject to taxation in New York as a person working abroad. When he came back home, he would go back to being taxed as a local resident since he was no longer working abroad. He would also continue being on his daughter’s apartment lease as the guarantor and therefore pay all the subsequent taxes related to the lease. The taxpayer’s taxable income would be $150,000 from the sale of stock of a California corporation which only held New York real property + $4,000 in NY State lottery winnings + $50,000 distribution from his pension plan + $1000 interest income from his savings account from ING + $100,000 in gains from the sale of a painting located in Connecticut but sold while temporarily at a museum located in New York. The cost of the painting was $20,000. To make a total of $305,000 The amount of the taxpayer’s income that would be subject to New York taxation would be around 100/365 x 100,000. The time he spent working in the company’s out-of-state field offices would not be liable to taxation in New York. The allocation formula would be simply dividing the number of days spent in New York with a total number of days in a year and multiply with his total wages from the company for a year. There are around 155 days that the taxpayer cannot account for in terms of where he was working. Since there is no way of determining this, there would be no taxes calculated for these days.  

Geoffery Jack vs Wessex City Council Coursework

Geoffery Jack vs Wessex City Council - Coursework Example According to the research findings, it can, therefore, be said that the legal issues, in this case, were as follows: first, the council argued that under Section 41(1) of the Highways Act 1980 it was only under a duty to maintain the highway and this duty did not extend to, as Mr. Jack alleged, keeping the road free of snow and frost at all times. Second, the issue was to construe the exact meaning of the word â€Å"maintenance† and whether it could contain the duty to keep the snow and ice off the road. Third, the issue was the scope of the duty that had to be attributed to the local authority to maintain the highway. Was it an absolute duty? Was it based on negligence on nuisance? Fourth, whether the council at that point in time when the accident occurred was under a duty to maintain (meaning according to the one decided upon earlier) and did it breach that duty. It is likely that Lord Hoffman stuck to the literal rule of interpretation. When construing the meaning of the w ord â€Å"maintenance† he laid down the possible meanings of this word, alluding to â€Å"repair† whether that included maintenance or not. But he also mentions in line 218 that regardless of what meaning is attributed to the word â€Å"maintain† the material issue in this question is that of whether the council had a duty to ensure that no ice has been present on the road that morning. The purposive rule is seen applied where Lord Hoffman tries to observe the intention of the parliament (or the draftsman) and looks at the entire historical context to hold that as far as maintenance was concerned, the council was already carrying that out. In rules of language, it could be said that Lord Hoffman made use of the ‘Ejusdem Generis’ as he quoted different meaning of maintenance in line 44. In determining whether a duty existed or not, the court clearly applies literal rule in holding that the council did not owe a duty to make sure that there was no sno w – and it held that a duty to maintain only includes maintaining the fabric of the road and not to make sure no snow was ever present on the surface. Lastly, from line 156 to line 190 the court seems to be operating on the presumption that the common law has not changed and no legislation (1959 or 1980) purposed to change the common law, instead of subsequent acts only codified it. There is evidence that Lord Hoffman referred to the long title of the Highway Act 1980 and that constitutes an intrinsic aid in statutory interpretation. Other intrinsic aids that he alluded to were the definitional section contained in the act itself.