RELATIONSHIP BETWEEN MONEY SUPPLY AND LEVEL OF NATIONAL INCOME IN NIGERIA
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RELATIONSHIP BETWEEN MONEY SUPPLY AND LEVEL OF NATIONAL INCOME IN NIGERIA
ABSTRACT OF THE RELATIONSHIP IN NIGERIA BETWEEN MONEY SUPPLY AND NATIONAL INCOME
This study aims to assess the link between money supply and national revenue in Nigeria throughout the time period under consideration.
The importance of money in the functioning of the economy is widely debated. The means by which money impacts income and output, as well as the amount to which changes in the money supply affect the economy, are particularly contentious issues.
Monetary policy is concerned with the monetary authorities’ discretionary regulation of the money supply in order to accomplish the intended economic benefit (price stability, full employment equilibrium, and/or higher production output). The policy tries to achieve specified goals by altering the amount of money or the liquidity of the financial system.
These aims include determining the real connection between money supply and national revenue in Nigeria during the year overview in quantitative terms.
These specific objectives’ overarching goal is to offer suitable policy recommendations.
According to the works examined and data acquired, the searcher discovered that monetary policy issues have tended to divide economists into monetarism and Keynesians.
The study also revealed that there are expansionary and restrictive monetary techniques for combating depression and inflation.
Furthermore, it was discovered that money supply was a determinant factor in Nigerian economic activity. Multiple regression and statistics of variance procedures were used in the investigation.
INTRODUCTION TO CHAPTER ONE OF THE RELATIONSHIP BETWEEN MONEY SUPPLY AND NATIONAL INCOME IN NIGERIA
1.1 BACKGROUND TO THE STUDY
Money’s importance in the functioning of the economy is widely debated. The extent to which changes in money supply (that is, money stock) affect the economy are two issues that have given rise to a major debate between two groups of economists distinguished by their adherence to two opposing bodies of economic theory known as Keynesians and Monetarism.
The argument has been lengthy and complex, progressing through numerous stages over the years. This dispute has significant consequences for monetary policy effectiveness and the role of monetary policy relative to fiscal policy in affecting income, output, employment, and the rate of inflation.
The link between the stock of money and the amount of income and output is central to the dispute between monetarism and Keynesianism.
1.2 STATEMENT OF THE PROBLEM
There are a thousand and one theories about the relationship between money supply and macroeconomic variables including national income, prices, and levels.
Before the Great Depression of the 1930s, economists assumed that increasing the supply of money would lead to a rise in the price level (inflation).
During the Great Depression, however, a group of economists developed. They claimed that investment was the primary driver of fluctuations in income and employment.
Money, according to one group of economists, is not an important driver of the level of economic activity, while money, according to another group,
is an essential predictor of the level of economic activity. They also believed that when there is unemployment in the economy, the money supply expands.
This results in an increase in income. A number of questions occurred as a result of the aforementioned analysis, as this group of economists supported their assumption with a large amount of empirical evidence.
Is money supply an essential determinant of economic activity in Nigeria, for example?
Is there a relationship between Nigeria’s money supply and the level of national income? As a result of the above study questions forming the topic of this research, an attempt will be made to determine the effects of money supply on the Nigerian economy.
1.3 GOAL OF STUDY
The following are the precise objectives of this research: To determine whether or not there was a relationship between Nigeria’s money supply and the level of national income during the time period under consideration.
The study also aimed to investigate and determine which of the opinions on monetary theory are valid in the Nigerian situation. It also determines which monetary aggregates have a greater impact on economic activity in Nigeria than others.
1.4 THE SIGNIFICANCE OF THE STUDY
The central bank of Nigeria (CBN) will greatly benefit from this research on the relationship between money supply and the amount of national revenue in Nigeria.
The findings of the study will allow Nigeria’s central bank to more successfully reform its core duty, which is to regulate the amount of money in circulation.
This research would enable the CBN to carry out this function successfully and efficiently in accordance with the government’s prescribed goals, purposes, or objectives.
Furthermore, the Nigerian government or the Ministry of Finance, policymakers, and even other researchers can benefit greatly from this research. It would also assist students, scholars, and the general public who are interested in learning more about the role of money supply in economic achievement.
1.5 DEFINITION OF TERMS
The total amount of money in the economy at any particular time is referred to as the money supply.
The total of all payments to factors of production is referred to as national income. It includes staff salaries, rent, interest, and profit. Gross National Product (GNP) or Gross Domestic Product (GDP) are other terms for it.
National income, on the other hand, is defined as a country’s collective wealth.
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