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Most economists hold that, since the early 1980s, correlations between various definitions of money and national income have broken down. The reason for this breakdown, it is held, is that financial deregulation has made the demand for money unstable. As a result it is held the usefulness of money as a predictor of economic events has

There is almost complete unanimity among economists and various commentators that inflation is about general increases in the prices of goods and services. From this it is established that anything that contributes to price increases sets in motion inflation. A fall in unemployment or a rise in economic activity is seen as a potential inflationary

In his various writings, Murray Rothbard argued that in a free market economy that operates on a gold standard the creation of credit that is not fully backed up by gold (fractional-reserve banking) sets in motion the menace of the boom-bust cycle. In his The Case for 100 Percent Gold Dollar Rothbard wrote, I therefore advocate as the soundest

The so-called multiplier arises as a result of the fact that banks are legally permitted to use money that is placed in demand deposits. Banks treat this type of money as if it was loaned to them, thus loaning it out while simultaneously allowing depositors to spend that money. RELATED: “ Austrians, Fractional Reserves, and the Money Multiplier “

We are often asked about the mechanisms by which the US Federal Reserve Board (the Fed) influences the level of US interest rates and whether these mechanisms also influence the level of the US money supply. It has long been regarded that the Fed no longer inflates and contracts the money supply but rather simply acts to target interest rates. The

According to conventional analysis, a key factor in exchange rate determination is the state of the balance of payments. It is held that as long as the US continues to run a large trade account deficit, which stood at $48.5 billion in January 2017, this is likely to keep pressure on the US dollar exchange rate against other currencies. Following

According to most economic experts, when an economy falls into a recession the central bank can pull it out of the slump by means of money pumping. This way of thinking implies that money pumping can somehow grow the economy. Indeed US historical evidence supposedly does show that easy money policy seems to work. For instance on average between

For most economists and commentators the main role of the Fed is to keep the supply and demand for money in equilibrium. Whenever an increase in the demand for money occurs — in order to maintain the state of equilibrium — it is held that the Fed must increase the money supply as a necessary action in order to keep the economy on a path of

In an exchange with readers on Time magazine’s website on December 22, 2010, the Fed chief – at the time Ben Bernanke – was asked why the Fed is creating dollars “out of thin air”. His response was that the Fed does not print money. In addition, since the early 1980 the Fed no longer pays attention to the quantity of money as such but rather sets

There is almost complete unanimity among economists that the most important role of the central bank is to attain price level stability. It is held that price stability promotes economic growth and people’s well-being by increasing the efficiency of the market mechanism. According to the former president of the Federal Reserve Bank of New York