TenPrinciplesofEconomics.pptVIP

* * While the long-run effect of increasing the quantity of money is inflation, the short-run effects are more complicated - and controversial. However, most mainstream economists believe the following: An increase in the quantity of money causes spending to rise, which causes prices to rise, which induces firms to produce more goods and services, which requires that they hire more workers. Hence, in the short-run, increasing the quantity of money causes inflation to rise, but unemployment to fall. Of course, REDUCING the quantity of money would have the opposite effects (inflation would