Article Image

IPFS News Link • Economic Theory

Is There an Optimum Growth Rate of Money?

• arclein

It is widely held that a growing economy requires a growing money stock because economic growth increases demand for money. Many economists also believe that failing to accommodate the increase in the demand for money leads to a decline in consumer prices. This could destabilize the economy and produce an economic recession or even a depression. 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. They hold that if this percentage is maintained over a prolonged period, it will create economic stability. The idea that money must grow to support economic growth implies that money sustains economic activity. However, money's main job is to be a medium of exchange, not sustain economic activity. Instead, economic sustenance is provided by saved consumer goods.


www.BlackMarketFridays.com