An overview, setting the scene for the need for a financial system -- The commercial banks and the money supply process -- The mechanism behind the money multiplier and the market for loanable funds -- The demand for money holdings by firms and households -- Rates of interest and the new...

Regarding inflation as being a monetary phenomenon in the long-run is a widely-held view in modern macro economics. We analyse this topic by means of a P-star model. Based on the quantity theory of money, this approach explains inflation via a supposed equilibrium price level (P-star), which...