Syllabus D1. Money in the economy 1 / 4

a) Define what is meant by “money supply” in an economic context.
b) Outline how money supply may be controlled in an economy.
c) Outline the basic relationship between the demand for money and interest rates.
d) Explain briefly and illustrate the interaction between inflation and interest rates.
e) Discuss the possible consequences of inflation in an economy and its effect on organisations in general.
f) Describe how the application of different monetary policies can affect the economy.
Money in the economy