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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29 views

Is Venmo considered part of M1?

Isn't this dependent on whether you choose to connect your debit card and checking or savings account or credit card to your Venmo account? Credit cards are not part of M1; however, debit cards and ...
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37 views

How is reserve money 'multiplied' by the banking system?

I'ma an econ newbie so please forgive my lack of understanding. I am confused as to how the money multiplier effect works. I get that the money multiplier effect doesn't actually hold true as banks ...
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28 views

Model with money creation

is there any macro model/paper introducing money creation (ex nihilo money creation) ? I would be very interested in reading them.
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Why would a CBDC (Central Bank Digital Currency) be good for the economy?

I've read about CBDC, how it could be a cryptocurrency like digital payment system, that could replace fiat currencies. But what I don't get is what value would it give to the economy? Someone who ...
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43 views

What would happen if, hypothetically, money velocity would reach infinity?

If, hypothetically, money velocity would reach an infinite speed, what would happen to that economy? If it would be infinite then it would mean that there would be infinite transactions and therefore ...
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What's wrong with printing more money [duplicate]

Suppose a government is in debt, why will there be inflation if it makes more money and pay other countries borrowed money back?
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40 views

Does inflation equal change in M1 or M2?

According to monetarism, inflation can be predicted precisely by the change in money supply and GDP growth. Does "money supply" here refer to M1 or M2, i.e. does it include debts created by ...
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Would a fair distribution of wealth from the super rich increase the purchasing power/life quality of the average person?

I will start by saying that I do not have any background in finance and that the following question might be very much naive, but it has been bugging me for a while now. The general narrative seems to ...
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How does total money in the economy changes?

I don't understand why total money in economy increases. Where does this money come from?
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160 views

Why does fiat money have value?

Or as Tobin (1992) put it: "How Can Money Have Positive Value in Exchange?" Money, however, is an embarrassment to value theory. According to standard theory, something can have positive ...
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Why does an economic slowdown lead to deflation?

Usually economists say that in recession there is deflation, so increasing the money supply does not lead to a high level of inflation. According to the Quantity theory of money, the price level is ...
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In today's money, what was the value of a 1492 Spanish maravedí?

Satava (2007) estimates that the costs of Columbus's 1492 voyage was 1,765,734 maravedís. In today's money, what was the value of a 1492 Spanish maravedí?
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Why has M1 shoot up?

M1 has increased massively during the current pandemic. Below is an image from Fred St. Louis. Similar picture emerges from other countries. According to Fed data, the increase is due to a rapid ...
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24 views

Interest rate determination in the real world

I have just learnt about the demand and supply framework for money and how the equilibrium interest rate in an economy can be determined. In theory, based on that framework, an increase in nominal ...
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Why not create money to assist the post-COVID-19 economy?

In an imaginary country, a horrible computer virus infected some banks. Within a week, it caused the wealth of a large portion of the population (say, 50%) to drop significantly. For some, it cut 80% ...
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Value of money (incomes) question - what is the “r” here?

I would like some help with a fairly basic "value of money" question. (I'm very much a beginner in this field so please bear with me.) I'm writing about income changes throughout a decade (2010-2019)....
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Why can't someone have their money restored if someone they paid in advance goes bankrupt?

A friend paid a travel company €3000 for a holiday in Australia. However the travel company went bankrupt so now her €3000 is lost. She has been informed by the liquidator that the company had such ...
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Creation and distribution of money from scratch in a country (USA as example)

Suppose in an alternate history, 21st century USA operated on the barter system... no system of money is used. It has all the technology of the 21st century (computers etc). Just no money. The ...
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Money demand in QTM

What is the different between Classical,Long Run and Short run quantity theory of money(QTM)? I have read that the transaction demand for money(Mt)is defined as kPY, where k=1/velocity of circulation....
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Does the income from a product or art count as passive income?

When a writer publishes his book, can we classify the income from the book as passive? Or another example, when a musician publishes his album, does the album generates passive income, making any form ...
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If a fluctuating cryptocurrency becomes the new world coin, would it stop fluctuating?

An often mentioned criterium for money is that it should be a unit of account. It could be argued that cryptocurrencies don't satisfy this requirement. The argument is that businesses like bakers ...
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What did Jevons mean by this quote?

Jevons (1875): Currency is to the science of economy what the squaring of the circle is to geometry, or perpetual motion to mechanics. I can't make any sense of this quote. I know that the "...
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58 views

The government does not need to gather capital via tax and Treasuries to spend? According to MMT

I have watched Warren Moslers interview. https://www.youtube.com/watch?v=W97s3zbFKvc&t=841s. At 7:26 he says that the Treasury does not issue securities for the purpose of financing spending (it ...
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What happens if you cannot lend more than what you have?

This is hypothetical but what would happen if you cannot lend more money than you have? Say you have £100, the maximum you can lend is £100. But somehow you lend £200 to Joe, and Joe spends all of it ...
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Is there some background/explanation why the Fed discontinued publishing their M3 indicator, circa 2006?

As Wikipedia says and as it can be easily verified, since 2006, the Fed no longer publishes an M3 indicator (unlike the ECB which still hangs on to that notion). So is there some background or ...
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Is there a clear timeline of ECB/Eurosystem's changes to the defintion of M3 (with regard to repos)?

I found that circa 2012 the ECB/Eurosystem changed their definition of M3 to exclude at least some repos, which previously were included. According to a 2014 Bundesbank publication, the change ...
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Bank of Canada operating band

I read the following quote about the Bank of Canada's "operating band" for inducing target overnight loan rates: ...
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Creation of Money - Hypothetical Situation

Imagine you sell me some consulting services. I don't have any cash, so I give you a $100 IOU instead. You now have a $100 Note Receivable on your Balance Sheet. ...
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Who owns money?

Bishop Nicole Oresme (1320-1382), in the first monetary treatise, wrote: CHAPTER VI: Who owns the Money? (Cuius sit ipsa moneta?) Although it is the duty of the prince to put his stamp on the money ...
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What happens to Interest rate if the money supply is fixed?

With the increase in Money supply, the nominal interest rate tends to increase. But what happens if the supply of money is fixed? What happens to the Interest Rate?
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Do reserves at Bank of Canada count as money?

I read the following three statements concerning M1 and M2 in Canada: a) "M1 consists of currency held outside the banks and chequable deposits of individuals and businesses." b) "M1 does not ...
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Monetary Theory Money Model Help

the following is a monetary theory overlapping generations model question and I wonder whether I have the correct answer. Can someone please let me know? Thanks! Question: Suppose there is a fixed ...
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24 views

Exogenous variables and money

What are the exogenous variables that drive demand for and supply of money? Are there variables in common between the two? I think I'm getting caught up with interest rates, as adjusted by the Feds vs ...
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Help finding historical data for velocity of money (M1 or M2) for any country except USA

Can anyone point me to a data set of money velocity for at least 20 years back for any other country than the US?
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What happens when a country's central bank significantly reduces the available currency?

The central bank of Iraq has significantly reduced the note count from 55 Trillion to 5 trillion. Logic would dictate that when a supply is reduced the value of the item that has been reduced will ...
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287 views

Why is the marginal utility of money assumed to be constant in Marshallian Theory of Consumer Behaviour

While studying the Marshallian Theory of Consumer Behaviour, I came across the assumption that the marginal utility of money is assumed to be constant. Can someone please explain why is this so?
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demand for money

I am currently studying the demand for money by Blanchard. this model assumes that the amount of money held is basically related to transaction levels and the the attractiveness of bonds. i.e.: ...
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41 views

Initial creation of reserves

I am currently reading the book "Where does money come from?" which is co-authored by Richard Werner after I took the "Money and Banking"-class in coursera by Perry Mehrling. There are certain ...
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I'm looking for a reviewed source on the amount of money in the world

As in title, I'm looking for a paper estimating the amount of all money in the world, sum of value of all national currencies or something like this. When I google it, I find only pop-science ...
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How does the pie get larger?

I understand the concept of creation of wealth through trade, innovation, labor and capital. New value is being added to the economy. Let's imagine for a second that there are no central banks and the ...
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32 views

Interest rate - Price of Credit vs Price of Money

I read somewhere that interest rate as the price of money is wrong but rather it is the price of credit. Can someone elaborate and explain what this means?
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133 views

Why is the cash in circulation on the rise in rich countries?

The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional? For example, here's ...
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What happens if a country omits the zeros of it's current money?

I mean, for example, the government changes all x10000 to x1; where x equals to currency of the respected country (Dollar, for instance).
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Quantity theory of money

Suppose the velocity of circulation (V) is constant. Annual growth rate of real GDP is 5%. The money supply grows by 14% per year. Use the quantity theory of money to calculate the inflation rate. My ...
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Gapminder's Dollar Street and the role of self-supply

I find it quite hard to get a clear picture of what the income numbers in Gapminder's Dollar Street tell. How to compare \$27 in Burundi with \$10,098 in China? What would it mean that the family in ...
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Convention / standard methodology for calculating real prices?

Is there an established professional standard used by economic / financial institutions for including or excluding i) the starting year/period, and ii) the end year/period when calculating real prices ...
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Can inflation occur in a positive-sum game currency system such as the Stack Exchange reputation system?

As most active users of this site know, the way the reputation system works is that everyone starts out with 1 reputation and a user can earn more reputation by asking good questions and writing ...
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What would be the costs of declaring/legislating that Scottish banknotes be legal tender?

Bank of England: English banknotes aren’t legal tender in Scotland. Scottish notes aren’t legal tender in England or Scotland. Committee of Scottish Bankers: Scottish Bank notes are not Legal ...
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Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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186 views

Is it reasonable to consider government bonds as money

Some measures of the money supply include governments bonds... but I wonder to what degree governments bonds can be considered money. IMHO the degree to which X can be thought of as money equals the ...