![]() ![]() ![]() ![]() Over thousands of years, people have settled on gold as their preferred medium of exchange. Ludwig von Mises wrote that over time “there would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange in a word, money.” Instead, economic sustenance is provided by saved consumer goods.Īs for money, many different goods have served as a medium of exchange. However, money’s main job is to be a medium of exchange, not sustain economic activity. The idea that money must grow to support economic growth implies that money sustains economic activity. They hold that if this percentage is maintained over a prolonged period, it will create economic stability. ![]() Some economists who follow Milton Friedman-also known as monetarists-want the central bank to target the money supply growth rate to a fixed percentage. This could destabilize the economy and produce an economic recession or even a depression. Many economists also believe that failing to accommodate the increase in the demand for money leads to a decline in consumer prices. It is widely held that a growing economy requires a growing money stock because economic growth increases demand for money. ![]()
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