How money supply affects inflation?

Inflation is the rate at which the general level of prices for goods and services is rising and subsequently, purchasing power is falling. The money supply, or the amount of money available in an economy, can affect inflation. When the money supply increases, more money is available to buy goods and services, which can drive up prices and lead to inflation. Conversely, when the money supply decreases, there is less money available to buy goods and services, which can cause prices to fall and lead to deflation. Central banks, such as the Federal Reserve in the United States, use monetary policy tools to control the money supply and influence inflation.

The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.


At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.

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