Abstract
An increase in money supply lowers unemployment. On the other hand, it raises inflation. In the numerical example, a unit increase in money supply lowers the rate of unemployment by 1 percentage point. On the other hand, it raises the rate of inflation by 1 percentage point. For instance, let initial unemployment be 2 percent, and let initial inflation be 2 percent as well. Now consider a unit increase in money supply. Then unemployment goes from 2 to 1 percent. On the other hand, inflation goes from 2 to 3 percent.
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© 2010 Springer-Verlag Berlin Heidelberg
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Carlberg, M. (2010). Monetary Policy. In: Monetary and Fiscal Strategies in the World Economy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-10476-3_2
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DOI: https://doi.org/10.1007/978-3-642-10476-3_2
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Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-10475-6
Online ISBN: 978-3-642-10476-3
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