THE IMPACT OF MONEY SUPPLY DYNAMICS ON DOMESTIC DEMAND AND PRICE STABILITY

Abstract

This article provides an in-depth analysis of the impact of the velocity and volume of money circulation in the economy on domestic demand and price stability. The mechanisms of both direct and indirect influence of changes in the money supply on consumers’ purchasing power, production volume, and market equilibrium are examined. Particular attention is paid to factors such as demand-pull inflation, exchange rate volatility, and changes in production costs arising from excessive expansion of the money supply. The study evaluates the effectiveness of the Central Bank’s monetary policy instruments, including interest rates, reserve requirements, and open market operations, in managing domestic demand. The findings indicate that the growth rate of the money supply can stimulate economic growth; however, if left uncontrolled, it exerts negative pressure on price stability. The article also presents scientifically grounded recommendations for optimizing money supply management in economic policy.