Post
Topic
Board Economics
Re: Why Bitcoin is not that good as currency?
by
adzino
on 13/11/2019, 15:30:40 UTC
-snip-
Supply of goods( Aggregate Supply) and supply of money are separate things
Demand of money and demand of goods( Aggregate Demand) are two separate things
Yeah, it is true that supply of goods and supply of money are two separate things, but they are closely related, specially aggregate supply and supply of money along with aggregate demand. You see, as the aggregate demands starts to rise, the price of the goods also starts to rise at the same time (talking about short run before reaching an equilibrium). Thus with the increase of the price of the goods, the amount of "money" needed to buy those goods will also increase. Thus the government follows the monetary policy. The fed buys and sells those government securities to control the supply of the market until a proper equilibrium has been reached.