ABSTRACT
The framework provided by monetary equilibrium theory enables us to examine the economic and political consequences that emerge when the monetary system fails to maintain monetary equilibrium. Given our definition of monetary equilibrium as the equality of the quantity of money with the quantity demanded at the prevailing price level, there are two possible cases of disequilibrium that can occur. The first is when the supply of money is greater than the demand to hold it, and the second is when the supply of money is less than the demand to hold it. These disequilibria can come about because of demand side or supply side changes. In other words, it does not matter whether the inequality of the supply and demand for money occurs because of absolute changes in the money supply, or because of a failure to properly defend monetary equilibrium in the face of changes in the demand for money. Whether due to errors of commission or omission, many of the general effects will be the same, although not all of them. It is the relative relationship between the supply and demand for money that matters the most.
