The modern Western economics defines the rising overall price caused by increased banknotes supply as the price hike driven by demand. This theory, in fact, represents a misunderstanding. In macroeconomic theory, the aggregate demand is the total actual demand, and the increased banknotes supply is by no means the cause for the increase in actual demand. The increase in banknotes supply can only increase the nominal aggregate demand, which leads to the rising general price level, only displaying a monetary phenomenon, for which monetary policy is effective;increase in actual aggregate demand will drive the rise in overall price, and lead to passive banknotes expansion, for which monetary policy loses its effectiveness.
|Original language||Chinese (Simplified)|
|Number of pages||5|
|Publication status||Published - 2012|
- rising overall price
- aggregate demand
- banknotes supply
- monetary policy