The Free Market Center
The Free Market Center
Inflationary Surge - Shoe Production Increases
(Money Supply Increases for a Period)
| Shoe Production Increases | 2.00%/Month |
| Wheat Production Fixed | 0.00%/Month |
Money Supply
Increases |
2.00%/Month |
In this first scenario production increases by 2% per month throughout the 60 months.
In the first two scenarios in this section money growth surges from 0% per month to 2% per month during months 20 through 30.
You can see the counteracting influence of money growth in one chart. Increased production causes the dollar price of shoes to decline until the surge in money counteracts that trend for ten months. Dollar prices for shoes start to decline again after month 30.
Notice, also, how money growth causes wheat dollar prices to rise temporarily then level off at a higher level.
The surge in money has no influence on the direct exchange relationships.
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Combining these influences shows even more starkly the influence of the increase in the quantity of money.