The Free Market Center
The Free Market Center
Decreasing Money Supply
(Decreasing Money Supply)
This scenario depicts the influence of deflation (decreasing quantity of money.)
| Shoe Production Increases | 2.00%/Month |
| Wheat Production Fixed | 0.00%/Month |
| Money Supply Decreases | -0.50%/Month |
| Shoe Production Decreases | -2.00%/Month |
| Wheat Production Fixed | 0.00%/Month |
| Money Supply Decreases | -0.50%/Month |
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In a deflationary environment (one of decreasing money supply) prices tend to decline relative to changes in production. In this case the dollar price of shoes declines in the face of both rising and falling shoe production.