Question

Write a paragraph that explains the correlation between money supply and economic growth.

Answer 1

Lets say you own a small home and you are earning $8,000 a month, that is enough money to pay your bills and buy groceries. At the end of the month lets say you only have $100 to spend on whatever you want. So now in your job you get promoted, so now you are making $30,000 in one month. You save $10,000 every month you pay your bills and you buy groceries and now you have $5,000 dollars to spend on whatever you want. At the end of 20 months you $200,000 you use that money to buy a bigger house with a nice car. So in conclusion the more money you get the more you can invest and investing in the right things will produce more and what you will be producing is called economic growth.