Question

What are the strengths and weaknesses of the endogenous interpretation of money?

Answer 1

Endogenous money is the supply of money determined by internal factors of a nation. It excludes the influence of external factors on demand and supply of money. Central banks of a nation control supply of money through interest rates.

Strengths:
1. It helps to maintain the economic growth by increasing the supply of money
2. Helps to improve employment status
3. Helps to control inflation

Weakness:
As it neglects influence of external influence, there could be imbalance between supply and demand for money which could lead to inflation pressures and reduce the economic growth