3 thoughts on “What does inflation affect currency demand?”
Kristy
Inflation means that the currency loses its purchasing power, so inflation has cost people's holding money. Therefore, people will reduce the demand for currency, that is, as soon as they have money, they will want to use it quickly, so as not to lose their purchasing power in their hands, and currency circulation will accelerate. When people have high inflation expectations, people's demand for currencies is greatly reduced compared to their currency income. This reminder: The above content is for reference only. This response time: 2021-07-27, please refer to the official website of Ping An Bank. [Ping An Bank I know] Want to know more? Come and see "Ping An Bank, I know" ~ B.pingan/Paim/Iknow/Index
In general, inflation refers to an economic phenomenon such as the depreciation of currency and the rise in prices. Your problem assumes that the currency supply is unchanged, and the inflation will continue. In fact, one of the causes of promoting inflation is the factors of currency supply. From the perspective of macroeconomic theory, the factors that promote inflation are diverse, and currency supply is only one of the factor. The understanding of the problem of inflation in macroeconomics is also a process of development. Several parties to inflation have made theoretical analysis. The more representative are the Kanesian school and the currencyist school. Regarding the general theoretical explanations of these two schools, I found a little information and attached to the end. I believe it will help you understand this issue. Theoretically, even if the currency supply remains unchanged, it is possible to inflation. The reason is that the factors that cause inflation are diverse. :>
Currency demand is the amount of money required to engage in economic activities at a certain price level. In the set of goods and labor volume, the higher the price, and the currency demand for commodity and labor transactions will inevitably increase. Therefore, the price and currency demand, especially the demand for trading currency, is a change in the same direction. In real life, the impact of normal price changes caused by the value of goods or supply and demand on the demand for currency is relatively stable. The impact of non -normal price changes caused by inflation on currency demand is extremely unstable.
Inflation means that the currency loses its purchasing power, so inflation has cost people's holding money. Therefore, people will reduce the demand for currency, that is, as soon as they have money, they will want to use it quickly, so as not to lose their purchasing power in their hands, and currency circulation will accelerate. When people have high inflation expectations, people's demand for currencies is greatly reduced compared to their currency income.
This reminder: The above content is for reference only.
This response time: 2021-07-27, please refer to the official website of Ping An Bank.
[Ping An Bank I know] Want to know more? Come and see "Ping An Bank, I know" ~
B.pingan/Paim/Iknow/Index
In general, inflation refers to an economic phenomenon such as the depreciation of currency and the rise in prices. Your problem assumes that the currency supply is unchanged, and the inflation will continue. In fact, one of the causes of promoting inflation is the factors of currency supply. From the perspective of macroeconomic theory, the factors that promote inflation are diverse, and currency supply is only one of the factor.
The understanding of the problem of inflation in macroeconomics is also a process of development. Several parties to inflation have made theoretical analysis. The more representative are the Kanesian school and the currencyist school. Regarding the general theoretical explanations of these two schools, I found a little information and attached to the end. I believe it will help you understand this issue.
Theoretically, even if the currency supply remains unchanged, it is possible to inflation. The reason is that the factors that cause inflation are diverse. :>
Currency demand is the amount of money required to engage in economic activities at a certain price level.
In the set of goods and labor volume, the higher the price, and the currency demand for commodity and labor transactions will inevitably increase. Therefore, the price and currency demand, especially the demand for trading currency, is a change in the same direction.
In real life, the impact of normal price changes caused by the value of goods or supply and demand on the demand for currency is relatively stable. The impact of non -normal price changes caused by inflation on currency demand is extremely unstable.