Question

why do economists use money as the primary measure of the strength and growth of the...

why do economists use money as the primary measure of the strength and growth of the economy?

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Answer #1

Money plays an important role in the economy . It is legally approved , medium of exchange which is widely accepted . Amount of money and velocity of money in the economy determines the health of the economy . More the amount of liquid money in the economy , more will be the aggregate demand and more consumption spending which will lead to growth of the economy . Velocity of money or number of times it is transacted gives a measure of inflation and price structure of economy . More the growth of economy , more will be employment levels . Hence there will be more money in the hands of people . So money is an indicator of growth .

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