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ney supply is increased, there is more money to go around; therefore the interest rates are less. More banks are willing to loan out money which creates competition for customers. When there is less money in the market, customers tend to have trouble attaining loans. There are fewer banks which can even make loans since interests are high with less money available, and those banks have multiple customers asking for the same money. In a way it results in a bidding war and the bank has to depict which loans will yield the safest outcome, therefore loans are difficult to obtain with a poor economy. The money supply is the biggest tool that the Fed uses to control investment in new businesses and growth and expansion of existing businesses. The interest rates ultimately determine how much and how freely people borrow and invest money.

利息对投资者的影响-Interest's Change Effects on Investors

As previously mentioned, there are many different techniques the Federal Reserve could implement in order to counter a weak economy. If the Federal Reserve decides to flood the market with more money than the Bank of Green could expect a decrease in interest rates. This could cause many investors to invest less, and with lower interest rates means consumers will be less inclined to save and instead will spend more of their income. This means that the Bank of Green will largely lose much of their income from prospective investors and savers.

In contrast, lowered interest rates means more loans may be in thought of from growing corporations or individuals looking to spend big. Many individuals looking to purchase large goods such as a car, home, etc., will consider it when interest rates are lower than usual. They will be willing to take on loans since they will not have to pay such high interest rates on the goods they purchase. Also, with lowered interest rates corporations will be more inclined to invest in a production line machine or even company location. This means that they would be looking to take out large loans which could allow an increase in business for the Bank of Green. Whether good or bad the Federal Reserve acting in a weak economy will change how the Bank of Green will continue its daily functions.

应用策略-Strategy Applied

The data provided by Bank of Green supports the connection the rate of increase in money supply has due to the increase in inflation rate. The data provided by Bank of Green shows the classical theory of inflation. A rate increase in money supply is going to cause a proportionate increase in inflation. The formula used by classical economists is: MV = PY. M represents the money supply in the economy, P is the price, and Y is the GDP. ? If we assume V, the velocity, stable, on a short period of time, the money supply will change very little. Also, if the velocity is stable, the change in money supply is proportional with the GDP.

The coefficient on the money supply variable shows how much the dependent variable is expected to decrease when the independent variable increases by one. The P-value represents the probability of obtaining a result as extreme as seen on the regression. Faster money growth does not cause inflation. Many people believe money growth causes inflation it is merely a misinterpretation of the formula MV = PY. There are factors that cause inflation such as shoe leather costs, menu costs, ta