Questions tagged [money]

any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context, or is easily converted to such a form. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered as money.

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Why doesn't the Fed restrict its open-market operations to Gold?

The Fed has traditionally bought and sold Federal government bonds (and agency securities that we may conceptually include within Federal government bonds). The first question is: what would be the ...
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Japan: Will the quantity of money per unit of output and the consumer price index show a huge divergence in the decades after 1980?

Milton Friedman, in one of his talks in 1980, showed a series of examples to illustrate his statement that inflation was a monetary phenomenon. One of the examples he used was Japan. The following ...
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Does money need to fulfill all three functions (store of value, medium of exchange and unit of account) to be considered money?

It is often suggested the money fulfills several functions, including being a store of value, a medium of exchange and a unit of account. However, I am not sure if the implication here is that money ...
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Why did money stop being backed by precious metals?

I am by no means someone educated in economy, but I like to learn about it. I am trying to understand and grasp why FIAT money became so popular after Nixon 'ended' the Bretton Woods system. Why was ...
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utility maximization problem

Consider a simple two-period model in which consumer utility is a function of consumption over two periods.At this time, the utility function of the consumer is assumed as follows. u(x1,x2) = x1 times ...
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With what money does a central bank buy gold?

When a Central Bank decides to increase its gold reserves, where does it get the money to pay for the gold from? How does this vary between countries with different strengths / policies on their ...
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Why did the Iranian Rial peak suddenly on 1 August 2014?

Search Iranian Rial and click on Max above the chart. Iranian Rial to Pound Sterling: Why did the Iranian Rial peak suddenly on 1 August 2014?
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What is sound money? Is it a well-defined concept within economics?

I see many broad definitions of what 'sound money' is. I also see it used as adjective. Is there a universal definition, and is the concept ubiquitous within economics?
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Relative value of medieval coins and underlying metal

If I understand correctly, in early medieval Europe (and likely at other times and places), a fluctuation in metal price occasionally made it profitable to melt down silver or gold coins. This ...
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Does an increase in money demand lead to an increase in demand for loanable funds?

Does an increase in money demand lead to an increase in demand for loanable funds? If so, what is the mechanism behind the change?
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What is the name of this economics tale about the role of money?

I recall this simple tale that summarizes the role of money in economy. I am looking for the original reference to its text, author and initial date of publication. A foreign merchant reaches a ...
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What would happen in global bank run

Bank runs are self-amplifying. What would realistically happen if the entire earth would experience a simultaneous bank run?
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When a country is banned from using SWIFT, what alternative ways do banks within that country still have to transfer or receive money from abroad?

If Russia invades Ukraine one of the sanctions that the west might impose is banning the banks in Russia from the SWIFT network. I've watched a short video from a financial news channel that explains ...
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Why don’t sovereigns like Venezuela just immediately replace the currency in event of a hyperinflation

I am struggling to understand why governments, when faced with hyperinflation, often let it drag out for years rather than bite the bullet and replace the currency. Given that by that point the ...
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If no one knew about inflation, would inflation take place?

I’m not an economist and would like some insight into this thought experiment. If people, the news, social media, etc. suddenly stopped talking about inflation, would inflation still take place? ...
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Is there any good source that explains Chiense early experiment with paper money?

Historically China adopted paper money very early but during Ming Dynasty paper money was replaced by silver coins. I would like to know why, is there any authoritative source that looks at this issue?...
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What is fiat currency and what are its ledgers?

How are these ledgers maintained and who does it? A practical example would be very helpful. Thank You Edit: I was learning about the history of money and ledgers. Because Bitcoin is a ledger in the ...
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Is it possible for a coin / token to act as long-term store of value and money at the same time?

I have recently watched a discussion about Bitcoin and its usage and one person argued that Bitcoin is a good way I will make the question as focused as possible by narrowing the terms: store of ...
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Is there any intuitive way to distinguish "sovereign money" and "bank money"?

From this link, I saw something relating to "sovereign money" Sovereign money is legal tender, on hand or on account as well as on mobile storage device, in the future maybe also in the ...
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How does foreign aid money help another country develop?

How does fiat currency help a country's economic growth? For example, if a certain country such as the U.S or Brazil gives 1billion dollars to a developing country like Angola or Congo, how does that ...
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Post-Keynesian theory and households?

"money must be introduced as part of the production process. Such a process is inherently dynamic, as entrepreneurs in each period must produce a new flow of commodities.” and households have no ...
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Why are high denominations of money tend to be paper notes?

Low denomination money tend to be coins because low denominations are exchanged more often therefore a low denomination paper money would wear out quickly. But doesn't this argument transfer to higher ...
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Is Fiat Money Ultimately Tax Based?

First, I am not an economist, so seeking general "good enough" answers. Since Nixon went off the gold standard the U.S. dollar has been a fiat currency backed by federal debt. While I ...
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Create currency with truly fixed exchange rate

Currency fluctuates depending on supply and demand In fixed exchange rate, any central banks could ties their currency to another country's currency or Gold price. Which, basically, still fluctuates ...
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Money transfers from A to B - in what proportions

I have been thinking about how money is kept moving, being transferred from A to B. And when I say A to B I don't just mean purchasing finished goods, I mean absolutely any transfer for any reason. So ...
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Why do we need to borrow?

(I have super limited knowledge with economics/finance/etc so please forgive me for any misunderstandings or misrepresentations.) Why do we need debt? People who make profit by lending to others don't ...
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Would printing money be necessary for remedying macroeconomic problems such as underemployment and overindebtedness if trade was balanced?

Printing money is often touted as the solution to the macroeconomic problems faced by developed economies today, namely lacklustre GDP growth, public and private overindebtedness and underemployment. ...
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What is the difference between money and currency?

Is money an intangible concept and currency a way to make it physically present? If not, then what is the difference?? Please dont duplicate it as i have read other answers and then asking.
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Was there any currency backed by other metals than gold, silver or copper?

Was any other metal than gold, silver or copper ever in history used to back a currency?
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Who first described/coined “velocity” of money?

Restatement: Who is responsible for originating the term “velocity” to describe the rate of money circulation? Also, who is responsible for first discussing this rate, specifically? Background: While ...
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Has anyone developed a good methodology for high-frequency inflation nowcasting?

Let's say I want to know what happened to the value of the U.S. dollar between three minutes and two minutes back from ... NOW. I have given myself a two minute slack period for data collection and ...
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A bank approves a loan: where does the money come from?

In the naïve picture of the banking system, banks strike a balance between savings invested in them by savers and the loans requested of them by borrowers. The money loaned to borrowers is the same ...
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How can money have a value? [duplicate]

The value of money can be the value to produce it. It costs, say, 1, to produce 10 000 000, in the mean (coins and paper, though digital money costs virtually nothing). This is called the extrinsic ...
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Why are the financial intermediation theory of banking or fractional reserve theory of banking still accepted despite evidence to the contrary?

In most textbook economics I came across the financial intermediation theory of banking and the fractional reserve theory of banking are presented as theories as how money is created. However there is ...
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How to obtain real money balances data

Theoretically real money balances ($m_t$) are defined as: $m_t=\frac{M_t}{P_t}$ Where $M_t$ are nominal money balances, and $P_t$ is the price index of the economy. If I were to make an empirical ...
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How does the size of the largest cryptocurrency compare to the largest traditional currency?

'Money' has evolved throughout economic history, and has included moving from: barter economies (i.e. no 'Money' - simple trading of final goods/services) commodity money - money whose intrinsic ...
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How did the Price/Value of any goods measure in money determined in the first place

Nowadays most value/price of goods and services are determined by the supply and demand in the market. And most of the time we use money which back by the credit/trust of the country to exchange these ...
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4 votes
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How is money destroyed when banks issue debt?

Bank of England (2014): Money can also be destroyed through the issuance of long-term debt and equity instruments by banks. How is money destroyed when banks issue debt? Say Bank X issues a £100 10-...
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How can a non-fiat currency be backed by gold?

Question is really simple- The value of gold is it self controlled by supply-demand, which insinuates that gold is fiat, only valued because people accept it and not because it has a use case. from ...
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How does paying off debt to the bank work?

So, I understand that banks create money by making loans which end up as deposits. But what I don't get, is how paying off debt works in the big picture. Let me explain. Let's say Jim got a loan of \$...
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Are US federal reserve notes money, or merely currency?

I have heard from my friend that US federal reserve notes (aka dollar bills) are not actually money, but merely currency. He told me that money and currency are different, and that money is currency ...
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Is It Possible for a Country to have a Gold Standard without a Fixed Price of Gold?

It is my understanding that at the beginning of the 20th century, many, if not most, countries had a monetary system that was based on a gold standard. However, by the end of the 20th century, most ...
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why is Fed creation of fiat money valid?

some people suggest that the government prints money to pay its bills and that the increased amount of money in circulation lessens the value of $1. i hope to get an explanation of why both ...
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Is the debt owed to resourceful producers by resourceless consumers practically irrepayable?

Here is my argument for the debt owned by resourceless consumers to resourceful producers (as currency, bonds, loans, or other means). Is it correct? If not, where am I going wrong? Economic value is ...
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Why don't Governments do away with the optics of taking on debt against new currency, and instead issue a limited currency every year (say 5% of GDP)?

Governments engage in the optical illusion of taking on debt against issued currency. The debt is effectively owed by the Government to itself. The value of the debt is completely controlled and ...
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Oliver Hart said that financing deficits by printing money can lead to hyperinflation "once the economy is close to full capacity". What does he mean?

In response to a poll on Modern Monetary Theory, Nobel Laureate Oliver Hart said that Governments financing deficits by printing more money "can quickly lead to inflation or even hyperinflation ...
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For stability, is there a limit to the sovereign debt that a Government owes to itself against issued fiat currency?

Looking beyond the optical illusion of Governments owing debt to Central Banks, Governments effectively owe themselves the sovereign debt created against issued fiat currency. By definition, there ...
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Money creation in textbooks since McLeay et al

The paper "Money Creation in the Modern Economy" by McLeay et al was published in 2014 in the Bank of England Quarterly Bulletin and has had well over a thousand citations. The paper is ...
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How does the fed pump the stock market [closed]

I've been hearing a lot about the fed "pumping the stock market" with trillions of dollars to maintain prices. I know the fed isn't allowed to actually buy stocks so how is this money being ...
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2 votes
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Is the value of a product measured in money a reliable measure of the economic value of this product?

This could rather be a philosophical question but would be curious to know the economist's POV and how these two (value of the product, total economic value of the product) correlate.
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