SUPPLY OF MONEY is the amount of money on circulation in a country.
The supply of depends on the following grounds.
- The monetary policy of the financial authority in which central bank increases or decreases the quantity of money.
- Credit policy of the commercial banks in which the banks make more credits.
- The public demands for loans. This entails the peoples demand for loan is high when sales and profits are high.
- The price of income earning Assets e.g. Bonds. When banks buy more bonds, it increases bank deposits.
DEMAND FOR MONEY: This means the people desire to hold money in liquids cash.