Money Growth and Inflation 30 Money Growth and Inflation

Figure 1 How the Supply and Demand for Money Determine the Equilibrium Price Level Value of Price money, Quantity fixed by the central bank Money supply 1 / P level, P (High) 1 Money demand 1 (Low) 3 / 1.33 4 A 1 / 2 2 Equilibrium value of money Equilibrium price level 1 / 4 4 (Low) (High) Quantity of money Copyright © 2011 Cengage Learning

Figure 2 An Increase in the Money Supply Copyright © 2011 Cengage Learning

Figure 3 Money and Prices During Four Hyperinflations (1) Copyright © 2011 Cengage Learning

Figure 3 Money and Prices During Four Hyperinflations (2) Copyright © 2011 Cengage Learning

Figure 4 The UK Nominal Interest Rate and the Inflation Rate Copyright © 2011 Cengage Learning

Table 1 How Inflation Raises the Tax Burden on Saving Copyright © 2011 Cengage Learning