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Could an increase in the demand for money counteract the effect of an increase in the money supply? For example, if there were an increase in the supply of apples by ten and, simultaneously, an increase in the demand for ten apples, this would be completely absorbed. In other words, after individuals have satisfied their demand for ten apples, zero apples would be left.
Following this logic, it would appear that the increase in the supply of money could be nullified by an equivalent increase in the demand for money. Henceforth, for the economy to stay in stable condition, it is important that the increase in the demand for money is matched by the similar increase in the supply. Consequently, if the increase in the demand for money is not met by the increase in the corresponding supply, this is likely to produce price deflation.
The amount of money in circulation is sufficient. The banks and central banks do not need to increase or decrease the amount of money in circulation, ever, because for the purpose of exchange, there is always enough. The increase and decrease of the money supply artificially by the banks cause the boom-and-bust economic cycle, according to Mises and the Austrian school.
10 sats \ 1 reply \ @Bell_curve 17h
Who is demanding more money?
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Usually the state.
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