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Understanding Stagflation and Money Supply Rise

Explore how the economy faced high inflation and unemployment together, known as stagflation. Learn about the impact of money supply on interest rates through the rise and fall of money supply.

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Understanding Stagflation and Money Supply Rise

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  1. Money supply rise and fall Davione Cotton

  2. stagflation • In the 1970’s the inflation-unemployment trade off disappeared for a few years. • Instead of moving in opposite directions, inflation and unemployment began to moving the same direction . • The economy began to experience high inflation and high unemployment at the same time or what you would call stagflation.

  3. Stagflation

  4. Money supply rise • Money supply- the total amount (bills, coins, loans, credit, and other liquid instruments) in a particular economy. • An increase in the money supply causes a drop in the equilibrium interest rate because the money supply curve shifts creating a new equilibrium. The money demand curve does not shift. • A decreased money supply will have the opposite effect.

  5. Money supply in depth • This chart below shows the rise and increase of money supply

  6. The fall of money supply

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