Posted: February 27th, 2021
Part 1: Please respond to the follow:
If “inflation is always and everywhere a monetary phenomenon,” why did the huge expansions of central bank money supply by the Federal Reserve, the ECB, and the Bank of Japan between 2007 and 2015 not result in high inflation in those economies?
*** At least 75 + WORDS ***
Part 2: Respond to classmate’s discussion:
“This is due to commercial banks’ holding on to their reserves and not creating broad money in the economy for the use of loans. In other words, even though central banks have made reserves available for commercial banks to loan, it has not reached the economy. So, there is in essence no increase in the money growth or velocity affecting the economy. However, when they do increase/release their current reserves for the availability of loans most economists agree there should be a rise in inflation on the horizon which will cause central banks to raise interest rates by tightening monetary policy.”
*** At least 40 + WORDS ***
Place an order in 3 easy steps. Takes less than 5 mins.