ECOR 3800 Lecture Notes - Lecture 3: Market Basket, Money Supply, Cash Flow
23 Jun 2019
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Document Summary
Inflation: is the rate at which the general level of prices and goods and services is rising, and subsequently, purchasing power is falling. Inflation causes money to lose purchasing power (dollars in one period of time are not equivalent to dollars in another period) Decrease in purchasing power (inflation) increase in purchasing power (deflation) Inflation makes future dollars les valuable than present dollars deflation when purchasing power of a monetary unit increases rather than decreases as time passes. (this is rarely happen) The more money in the system, the less value of the dollar ( the bank of. Canada controls the flow of money) the bank of canada seeks to increase the volume of money in the system at the same rate that economy is growing. The strength of the dollar in world markets affects the profitability of international companies, price may be adjusted to compensate for the relative strength or weakness of the dollar in the world market.
