Total private wealth

Total private wealth:

Total private wealth might be stated as society’s money supply, capital stock, and government debt (i.e., government debt comprises treasury bills, notes and bonds). And consumption is positively associated to total private wealth. When the nominal money supply raises and price level is constant, the real money supply rises. As it is a component of total private wealth, wealth rises, and in turn consumption increases. Whenever consumption rises, aggregate demand increases and the symmetry level of income increases. It might be observed that wealth and consumption rise without regard to modifications in the rate of interest. This follows that monetary policy is efficient even in the liquidity trap. According to Keynes, liquidity trap means to a situation in which an increase in the money supply does not outcome in a drop in the interest rate however merely in an addition to idle balances.

Dear Money:

Whenever there is inflation in a country, the central bank attempts to control it by following dear money policy. The word “Dear Money” means to a phase or policy whenever interest rates are high.

Cheap Money:

“Cheap Money” symbolizes a phase in which loans are obtainable at low rates of interest or a policy that generates this condition. Cheap money policy is followed by a central bank throughout a period of depression to raise the supply of money, therefore to stimulate the investment.

Value of money:

By “Value of Money” we refer to the purchasing power of money. The purchasing power of money based on the price level. An ordinary rise in the price level points out a drop in the value of money and a general drop in prices points out a rise in the value of money.

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