Questions tagged [money-supply]
Use for questions primarily related to the stock of money, either narrow money (MB or M0), and broad money (M1, M2, etc). This can also be used in questions related to the creation of money by governments and central banks, including questions related to models with a money market like IS-LM, where the supply is of importance.
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Why would bank runs lead to a decrease of the total quantity of money supply M1?
It‘s specifically about the German banking crisis of 1931. I get how the banks increasing their reserves and cutting their loans (starting 1930) would cause money contraction (at least of M1). Doesn‘t ...
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Design of a money skew economy (target: museums/libraries loan rotation sharing)
I was thinking about libraries and museums, and began wondering how such institutions might institute what I would describe as a "money skew economy." Skew in the math sense, of two lines ...
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Is there a global flow of income?
If I understand the circular flow of income correctly, we can visualize money moving around the country in exchange for goods and services. Sources of money are the central bank (MB) and the financial ...
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Where is the central bank in the circular flow of income?
In the five-sector breakdown of the circular flow of income (below), we account for leakages and injections from the financial, government and overseas sectors. My understanding is that the government ...
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How do bonds & shares relate to the money supply?
Non-eocnomist here. I'm trying to understand how money works, and what "money supply" means.
I understand about how banks take deposits and lend them out, turning short term loans (the ...
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How do write downs impact the money supply?
This is a bit of a mix of micro and macroeconomics, but someone asked me how write-downs would impact the money supply this week. I didn't have a good answer.
Usually, this isn't that big of a deal. ...
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What's exactly the T/Y value in the Quantity Theory of money simplified equation: MV=PT or MV=PY?
I understood the basic fundamental principle of the theory, that all things being equal, a change in the money supply affects price level.
Yet, now I am trying to understand this statement ‘ The QTM ...
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Where did the money supply go?
The money supply went from about \$4 trillion in 2020 to about $20 trillion today. Where did all that money go?
When the money supply went from about \$1.4 trillion to about $1.7 trillion, I was ...
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If the interest rate is increased to limit inflation, doesn't that increase the money supply?
If the interest rate is increased to limit inflation, doesn't that increase the money supply? Because one year later, 5% of the total bond will need to be created and put into circulation.
This, in ...
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Large quantity sale of CNY at current currency value
Some company wants to sell large quantity of CNY and buy USD on Forex. Let current currency value is 1 CNY = 0.14 USD at the time moment on Forex. When company sell large quantity of CNY, money supply ...
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Secondary money market effects of expansionary monetary policy using IS-LM model
According to the basic IS-LM model, an outward shift of the LM curve results in higher output because (as shown with the money market chart) expansionary monetary policy reduces the interest rate, ...
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How to prove that an increase in the money supply leads to devaluation of the currency?
In one article I've read that increase in the money supply leads to inflation and exchange rate change.
For example, if we have double increase in the money supply then we'll have double change in ...
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What happens to the money supply when a bank is allowed to go bust
I'd like to ask this question in two different ways just to help clarify the issues.
Scenario 1. There is no deposit insurance and the central bank take no special action in response to the bank ...
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Bank loans are often offered as a mechanism of money creation--but how is money created long term?
I've been reading on money creation. Bank loans are often cited as a mechanism of money creation: working based on fractional reserves, banks issue loans to the public based on deposits, thereby "...
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How would a Central Bank Digital Currency be different from a private bank deposit?
Both are digital, both can be transferred digital, and both are denominated in the same currency. A CBDC is "a direct liability of the central bank, rather than of private banks or coin issuers&...
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Money Creation Confusion
I've been studying money creation recently and have come across some contradictory statements and different types of theories that I'd like to clear up.
The classical theory of money creation which ...
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How can Real GDP increase while Money Supply remains fixed?
I'm studying the Money Market Graph with it's Money Demand and Money Supply curves. In the classical model they teach the Money Demand curve as sloping down to the right while the Money Supply curve ...
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Why did the US not refuse Gold Standard in 1929?
One of the things many nations did around 1929 (as the Depression started) was to refuse the Gold Standard.
One of the first things Franklin D. Roosevelt did after being elected in 1933 was to refuse ...
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Does demand decrease when supply increases? [closed]
I’ve been reading about supply and demand and I don’t know if I’m misinterpreting, but it seems like what they’re saying is that when the quantity supplied of something increases, the quantity ...
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How exactly is money supply related to the price of goods and services?
I keep hearing that prices of goods and services are based on the money supply, so, for example, if there was only one good or service in the entire economy, that good or service would be worth the ...
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Are there valid concerns of USD hyperinflation post stimulus?
This article The Dollar Endgame is probably one of many doomsday predictions that exist, but there were a few points mentioned that were new to me and seemed scary:
"Debt virtually always has a ...
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How can debt be larger than gdp? [closed]
government is taking debt because they spend it all at once and pay it over time so if you spend all at once there will be increase in gdp(multiple increase in gdp as money changes hands multiple ...
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What are these yearly spikes in the Russian Money Supply?
During a school project, I realized there are these consistent annual spikes in the Russian money supply chart. Any one know what these are?
https://tradingeconomics.com/russia/money-supply-m2
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What have banks mostly done with their "excess reserves" obtained during QE
I put excess reserves in quotes because I know that in many countries there are no reserve requirements, so what I really mean by "excess reserves" is reserves in excess of what banks like ...
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How does lending “create” money? [duplicate]
I keep hearing that when banks loan money, it creates money and increases the money supply. But this confuses me. Wouldn’t the money have to have already been created in order for them to lend it in ...
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How do Canadian banks manage their mortgage portfolio?
Firstly, I've read on CMHC website that only 30% of mortgages in Canada are securitized.50% of mortgages are on banks balanced sheet. And there is no reserve requirement in Canada (although there is ...
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Is there any graph that shows how the gold and silver content decreased in roman coins?
I am looking for a graph of at least a table with data that would allow me to make a graph, showing how the gold/silver content was slowly removed from roman coins due to debasement of the currency.
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Q question on the components of the $M_1$ component of money supply
The $M_1$ component of the money supply is given by the sum of the value of money held by the public+the demand deposits in the country + other deposits(money of other government institutions held by ...
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Central bank balance sheets and money supply balances
I've compared the central bank balance sheets of many countries and I've found some numbers strange for me. The balance sheet of a central bank should include all the assets on one side and all the ...
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Does printing more money necessarily lead to inflation?
Does printing more money necessarily lead to inflation? For instance, if the money supply increased, but the money just sat around and wasn’t distributed to people, would that still cause inflation? ...
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Question about quantity theory of money
I have a question regarding the infographic above. It says demand for money rises when money supply is low and demand for money reduces when money supply is high. Why exactly is that the case? Why ...
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Does the money supply increase when more types of money are added to the economy?
In some country, the currency is called "dollars". There are 100 trillion (100T) total dollars in existence. People trade these dollars for goods and services.
A new fintech startup comes ...
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Is it possible for the stock market to beat inflation forever?
Just a few thoughts on the possibility of markets beating inflation in the long, long term (say, hundreds of years). I am a theoretical physicist, not an economist, so please forgive my ignorance.
I ...
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How does the central bank reduce money supply by selling bonds if the buyer of the bonds can use bonds as currency?
When the central bank wants to reduce the money supply, it can sell bonds. That way, the money supply reduces by the amount paid for the bonds. The buyer will have bonds instead of cash. The bonds can ...
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How does debt-financed public infrastructure spending stimulate the economy if money supply is unchanged?
When a national government embarks on public infrastructure projects to stimulate the economy, the money spent on the infrastructure projects increases the money supply. However, if the projects are ...
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GBP Currency Crisis - Forex supply and demand affecting exchange rates
Reading this article on Why China Buys US Treasury Bonds I understand the notion of supply and demand affecting a currency value against the other and how they need to buy up the excess dollars they ...
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How exactly do interest rates affect the money supply?
For context, here is the graphic that my question is based on:
It says when interest rates are low, an employee paid 100 dollars will spend all 100 dollars, and when interest rates are high, an ...
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How do Foreign Investments by Central Banks increase the Money Supply of an Economy?
Trying to understand if "money supply" and "currency in circulation" apply only to the money within the borders of the country or does it also include its money in foreign nations ...
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Why the increase in bank loans is not reflected in increasing money supply?
In the US banking system, according to what I was able to understand, the way to increase the money supply (MS) is via commercial banks loans ( I suppose it includes loans to the government but in any ...
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Where can we find M2 (or M1) data breakdown by wealth percentiles?
(this question refers to the US only)
We have official data on M2 by the Fed, but, if I understand correctly, this M2 data includes even bank deposits of firms/corporations where I am after the ...
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Why isn't the money demand function called the real money balances demand function?
M=Money supply
P=Price
k= How much money people wish to hold for each dollar of income = exogenous.
Y = output
M/P= real money balances
Money demand function: (M/P)^d = kY
Why isn't the money demand ...
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Question about the quantity theory of money
M = Money supply
V = Velocity = Number of times the average bill changes hands in a time period.
P = Price
Y = Output
T = Transactions
Quantity equation
M * V = P * Y,
M * V = P * T
Why do we have MV ...
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Question about money supply and the nominal interest rate
How does an increase in money supply, due to a decrease in the REPO rate, decrease the nominal interest rate?
If an increase in money supply means more inflation, how doesn't inflation lead to ...
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What happens to Deposits when purchasing stock shares or money market fund shares?
I'm trying to understand the flow of money into the shadow banking sector, e.g. what happens when deposits are transferred to either a brokerage, or a money market mutual fund (MMMF), and specifically ...
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Significance of yield spreads in highly liquid environment?
I've come across this chart from a few months ago and am unable to trace down its origins. But I would like to think I should be able to decipher it even without the authors whispering in my ear. So ...
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Money Creation in the Modern Economy [closed]
I've been reading through this paper and found it fascinating, but have a few lingering questions which I can't quite reconcile.
The paper really stresses the point that banks are not reserve ...
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Loans create deposits, banks "are not reserve constrained"?
It is often said that banks are not "reserve constrained" when it comes to lending, and that loans create deposits (and therefore commercial banks create money). I have some doubts about the ...
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Where the budget of USA comes from?
When we say the budget of the defense department are 600 billions per year, where do the 600 billions comes from, are they just created from nothing by just increasing the money supply or they come ...
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Why Increase in Money Supply Reduces Interest Rate in Money Market?
I understand the fact the Increase in Money Supply reduces the interest rate in Money Market.
But these two explanations are confusing me a lot. I'm not able to understand which is correct.
Reason 1
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What is the connection between the money market and loanable funds market?
I am studying economics with Khan Academy and came across these 2 articles on
The money market and
The loanable funds market.
(LF = Loanable funds)
Now, clearly these 2 systems must be related, right? ...
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