Money and Inflation

When taking a look at inflation, it is important to also consider money.  Inflation deals with the fluctuations in prices which also has to do with the money supply.  Money is defined as the assets that one has in order to make transactions.  Some of the things we will look at with regard to money and inflation are:

• Interest Rates

• The Quantity Theory of Money

• Types of Money

• Functions of Money
  

In most economies, the money supply is controlled by a central bank.  In the United States, this central bank is known as the Federal Reserve.  Sometimes governments print extra money in order to raise revenue.  This is known as seigniorage.  The government prints money to increase the money supply which will in turn raise the inflation rate.  Seigniorage is a small part of the United State's revenue but is roughly 10 percent of other countries in Europe.

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