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Money Supply

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Monetary based model of money supply through the principle of money multiplier (m).

Money multiplier (m) is the ratio of the aggregate stock of money available in the economy (M) to the size of high powered money (H). It shows that the aggregate stock of money supply available in the economy is the product of the value of money multiplier times the size of high powered money. There are many money multiplier models developed by different economists at different time period like: -General model (IMF model) -Cagan model -Friedman model -Luckett model -Pesek and saving model -Jerry & Jordan model and so on… Out of them Jerry & Jordan model is taken as the best model of money multiplier that has 7 equations in hand as given as: M = C + DD + OD ---------------------- equation (1) H = C + R + OD ------------------------- equation (2) R = r + D --------------------------------- equation (3) D = DD + TD ---------------------------- equation (4) K = C/DD or C = K.DD ---------------- equation (5) t = …