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Inaion forcibly restricts consumpion by exacing the

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Unformatted text preview: ailable, the more financial transacIons occur for goods and services. •  The more that people are buying, the more physical money is needed. •  Banks buy new bank notes off of the Bank of Canada by selling government securiIes. •  These securiIes are assets for the government; bank notes in circulaIon are liabiliIes. InflaIon •  InflaIon is the rise in the cost of goods and services in the economy over a period of Ime. •  If the cost of goods goes up faster than the rise in wages, the consumers buying power is less than it was previous. •  High inflaIon is bad for the economy. •  An excessive growth in money supply can cause inflaIon. If money supply occurs faster than economic growth, inflaIon will result. Is inflaIon good or bad? •  hWp://www.bbc.co.uk/news/ business- 14115829 To intervene, or not to intervene, that is the quesIon! Keynes •  hWp://www.youtube.com/watch?v=qIp5- TKu_1g&feature=fvwrel Milton Freidman (1912- 2006) •  Expansion of money supply leads to inflaIon; governments should focus on price stability. •  Felt that changes to real wages and real interest rates iniIally...
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