If x amount of money were introduced (discretly, with no one noticing) to the market, how does the market “know” that that amount of money has been introduced (thus adjusting prices)?

Question

If x amount of money were introduced (discretly, with no one noticing) to the market, how does the market “know” that that amount of money has been introduced (thus adjusting prices)?

In: Economics

Answer 1

Sellers know the rate at which goods will arrive for sale from their factories. When things start selling faster than that, they raise prices to avoid running out (which would force consumers to buy from competitors). They don’t care if the cause is more money or more market share, their price raising response is the same. If prices remain high, they may utilize some of their excess profits to expand their supply, perhaps by building another factory or hiring more workers.