Question

Essay about contemporary topic on economy.

4 pages

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APA Style

Answer 1

Money

One of the major subfields of contemporary economics is currency, which should not be surprising as one of government's oldest, most widely accepted functions is control over this basic exchange medium. The drastic impact of shifts in the amount of money on price levels and rate of economic activity in the 18th century have been identified and extensively studied. A trend developed in the 19th century, known as the "capital quantity principle," As a result, rates tend to change in relation to the amount of money in circulation. Simply put, the quantity theory of money claimed that inflation or deflation could be regulated by adjusting the amount of money in circulation with the price level.

Money value is a term to be understood in order to get to know the theories of money. Many economists have described the term money value differently in economics. Many economists defined the value of money in terms of its weight and fineness as the value of gold and silver. On the other hand, few economists correlated the term value of money with a nation's internal buying power. Logically, however, value of money is related to its purchasing power, which relates to the amount of goods and services that can be bought with a unit of cash. In a country, the prices of money and price levels are inversely proportional to one another. For example, if a country's price level is high, the value of money is low and vice versa.

The rate of cash flow depends on various factors, such as transaction size, amount of trade, form of business conditions, price levels, and borrowing and lending policies. According to the money quantity theory, changes in a country's price level occur as a result of changes in the amount of money in circulation while keeping other factors constant. In other words, because of the increase or decrease in the amount of money, an increase or decrease in the price level will occur. It can therefore be inferred that the rate of prices and the amount of money are directly proportional to each other. Nevertheless, an increase in the amount of money will result in a relative decrease in the value of money in extreme conditions while holding other variables stable and vice versa.