ABSTRACT
Money supply and demand is the cornerstone of the theory of money. The study of money supply reveals the various economic factors that affect the quantity of money in circulation. It provides a basic starting point for analyzing how monetary policies actually influence the development of the economy. Correspondingly, the study of money demand stands for another foundation for the analysis of how money affects the economic development. Here, any change in money supply affects the healthy development of the entire economy. Money plays the role of economic blood, which constantly flows through all major economic sectors, stimulating economic activities, capital accumulation, production specialization and division of labor, and effect use of natural resources.
