The Free Market Center
The Free Market Center
Increasing Money Supply
(Increasing Money Supply)
This scenario depicts the influence of inflation (increasing quantity of money.)
| Shoe Production Increases | 2.00%/Month |
| Wheat Production Fixed | 0.00%/Month |
| Money Supply Increases | 0.50%/Month |
| Shoe Production Decreases | -2.00%/Month |
| Wheat Production Fixed | 0.00%/Month |
| Money Supply Increases | 0.50%/Month |
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In an inflationary environment (one of increasing money) prices tend to rise relative to changes in production. In this case the dollar price of shoes rises in the face of both rising and falling shoe production.