why do economists use money as the primary measure of the strength and growth of the economy?
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 .
Get Answers For Free
Most questions answered within 1 hours.