SUPPLY OF MONEY is the amount of money on circulation in a country.

The supply of depends on the following grounds.

  1. The monetary policy of the financial authority in which central bank increases or decreases the quantity of money.
  2. Credit policy of the commercial banks in which the banks make more credits.
  3. The public demands for loans. This entails the peoples demand for loan is high when sales and profits are high.
  4. 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.

Leave a Comment

not allowed!