/sci/ - Science & Math

>>14994315
What do you mean by "ideal money supply"? You mentioning GDP and frequency of transactions makes me think of the quantity theory of money (more like quantity rule of thumb of money).
>MV = PQ
>M: money in circulation
>V: how many times 1$ is used to purchase goods and services in a given period
>P: price level
>Q: quantity of goods and services
If M grows but Q and V stay constant, then P grows. Meaning increasing the money supply faster than the economy grows generates extra inflation.

That said this rule of thumb is 60 years old and isn't actually being used anywhere. Modern monetary economics takes into account things like market power, inflation expectations (e.g. self-fulfilling prophecies), etc. which the quantity rule of thumb of money abstracts away. Jordi Gali's textbook is often used as an introduction to modern monetary economics but it doesn't have a simple equation explicitly relating money supply and other economic variables as far as I remember.