Money, monetary standards, and monetary policy The nature of money determines some important properties of the economy, including the scope for changes in the overall price level and the opportunity for discretionary monetary policy -- that is, for control of the money supply in an effort to improve economic performance.
The basic relationship between money and prices is often described in terms of the “quantity theory of money.” In the long run, according to this proposition, the price level moves proportionately to the money supply. As a result, the rate of inflation depends on the rate of money growth.