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Factors that determine the value of money.
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[QUOTE="Jasz, post: 218096, member: 61772"] The value of money is determined by the market forces of supply and demand, as well as inflation and growth. Supply is based on the amount of money that is available within an economy, while demand is based on what consumers are purchasing. Inflation refers to the increase in prices for goods, and growth is the increase of the economy itself. One of the main factors affecting the value of money is supply and demand. If there are more people wanting a specific good or service than there are supplies to fulfill those demands, then a shortage occurs. This causes prices to rise, which affects the value of money because prices rise along with it. The reverse happens when there are more supplies than demands: This causes prices to decrease, which also affects money's value because it decreases as well. Another factor affecting the value of money is inflation. This refers to a gradual increase in prices for goods over time, which means that items people buy will become more expensive over time without them actually receiving anything extra in regards to quality or quantity. As more money enters an economy and circulates through it, inflation occurs because there is more currency in circulation than there are goods and services to purchase with it; this leads merchants to raise their prices so they can continue to make profit due to consumer desire. [/QUOTE]
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Factors that determine the value of money.
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