Muhammad Sameed Aijaz bgtyhjuyt (1).pptx

QWrefvji,edfgvuijhfg

1. The Quantity Equation Of Money And Segniorage Name: M Sameed Aijaz ID: IU02-0225-0792

2. Topics

3. Quantity Equation: MV = PT - Represents the relationship between the money supply, velocity of money, price level, and number of transactions - Shows how changes in the money supply or velocity of money affect the price level and number of transactions It is Also Called transactions velocity of money

4. Transaction to Income: MV = PY - Represents the relationship between the money supply, velocity of money, price level, and Real income or output (the actual amount of goods and services produced) - Shows how changes in the money supply or velocity of money affect the GDP (Nominal) It is Also Called Income velocity of money

5. Money Demand function And Quantity Equation: Real money balances Money Demand Function (M/P) Measure the purchasing power of the money supply, reflecting the actual goods and services that can be bought. - Understanding real money balances helps analyze the purchasing power of consumers. ( M/P)d = kY - The demand for real money balances is directly proportional to real income (Y). - As real income increases, people want to hold more money. - The constant k determines the proportion of income people want to hold in money.

6. Assumption of Constant Velocity: - If V is constant, then changes in M will lead to proportional changes in PY (nominal GDP). - This means that the velocity of money is stable and doesn't change in response to changes in the money supply. MV(Constant) = P Y

7. Money&Price Money Price -Money is a medium of exchange, unit of account, and store of value that facilitates economic transactions -Money can take various forms, including commodity-based money (e.g., gold), Paper currency, and digital currencies. -Price is the amount of money required to purchase a good or service. -Price changes can signal shifts in supply and demand, influencing consumer and producer behavior.

8. Inflation And Money Growth Inflation Money Growth - A sustained increase in the general price level of goods and services in an economy over time. - Measured as an annual percentage increase in the Consumer Price Index (CPI). - An increase in the money supply in an economy. - Can be caused by central banks printing more money, banks making more loans, or an increase in foreign exchange reserves.

9. Relationship between Inflation and Money Growth: - When the money supply grows faster than the economy, it can lead to inflation. - Excess money chases a limited number of goods and services, driving up prices.

10. Seigniorage : - The revenue earned by a government or central bank from printing money. - Occurs when the face value of the currency is greater than its production costs. - When a central bank prints new money, it can use it to buy goods, services, or assets. - The revenue earned from printing money is essentially an interest-free loan from the public.