Abstract
The modern Western economics defines the rising overall price caused by increased banknotes supply as the price hike driven by demand. This theory, in fact, represents a misunderstanding. In macroeconomic theory, the aggregate demand is the total actual demand, and the increased banknotes supply is by no means the cause for the increase in actual demand. The increase in banknotes supply can only increase the nominal aggregate demand, which leads to the rising general price level, only displaying a monetary phenomenon, for which monetary policy is effective;increase in actual aggregate demand will drive the rise in overall price, and lead to passive banknotes expansion, for which monetary policy loses its effectiveness.
| Translated title of the contribution | Analysis of Relationship between Total Demand and Banknotes Supply in Rising Overall Price: Widespread Misunderstanding and Effective Range of Monetary Policy |
|---|---|
| Original language | Chinese (Simplified) |
| Pages (from-to) | 41-45 |
| Number of pages | 5 |
| Journal | 江苏行政学院学报 |
| Issue number | 06 |
| Publication status | Published - 2012 |
Keywords
- rising overall price
- aggregate demand
- banknotes supply
- monetary policy
- ineffective