There are several alternative theories to explain the relationship of money with supply of money. The two most widely accepted theories explaining the behavior of money supply and money are the Real Bills Doctrine and the Fiscal theory of the Price Level. Supply of money denotes the movement of money which meets the demands of the money, needed for any purpose. In estimating the nature and extent of this relationship between the two, we can consult the opinions about the relationship between money and money supply of great economists from the past.

According to them, one should understand that from the very beginning the supply of money is the same as the demand for money. But then, this consideration is only to be taken into account in an equilibrium economy. Equilibrium is assumed for the simplification of the equations. In this basic money supply equation, the price level or value of money is equaled to the money supply. In that case, the price level and income are multiplied and the resultant is then divided by the money velocity. This establishes the relation between the money supply and money.

More Articles :

• Difference Between Monetary Base And Money Supply
• Four Tools That Federal Reserve Use To Increase Money Supply
• How Does The Fed Decrease The Money Supply ?
• Long Run And Short Money Supply
• Money Supply Growth Last Three Months
• Supply Of Money In Relation With Money
• What Are The Components Of The Money Supply ?
• What Happens When The Supply Of Money Increases ?