THE ROLE OF THE STATE IN REGULATING INFLATION PROCESS - MONETARIST CONTEXT

The mechanism of state intervention in the economy consists of a whole chain of causes and effects. It is headed by the money supply, hence the increase in the money supply, and at the bottom - the state of the economic situation. The monetarist concept of the transmission mechanism is based on the principle that the economic object must act in such a way as to bring as much profit as possible. To do this, it must try to perfect the structure of the asset portfolio and make it one in which it will generate more revenue. The concept of an asset portfolio includes not only cash and securities, but also fixed assets presented in various forms. Portfolios are balanced when the profitability of the marginal units of each type of asset is equal / balanced. The result is that there is no need to redistribute interchangeable assets. This balance is broken by the supply of extra money. The source of its growth may be open market operations, ie the purchase of government bonds by the central bank, for example. After selling the securities, the farms own much more money than they had before.