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Unformatted text preview: the same dollar can purchase only 4 pieces of chocolates. Therefore with the rise in the price, the value of the dollar falls. Similarly with a fall in the price level, the value of the currency rises. We can relate this to the variations in the quantity of money. Increase in M → Rise in P → Fall in value of M Decrease in M → Fall in P → Rise in value of M This relationship forms the basis of the monetary policy ....
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.
- Fall '10
- Monetary Policy