Does Printing Money Cause Inflation?
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The link between the money supply and inflation.
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Link between money and inflation
In theory, there is a strong link between the money supply and inflation. If the money supply rises faster than real output, then prices will usually rise. This means if a Central Bank prints more money, we will often (though not always!) get higher inflation.
Therefore, increasing the money supply faster than the growth in real output will cause inflation. The reason is that there is more money chasing the same number of goods. Therefore, the increase in monetary demand causes firms to put up prices.
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