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.
184
questions
0
votes
1answer
20 views
Universal basic loan
I'm looking for feedback and critiques of an idea. Universal basic income is an increasingly popular idea, but most agree that it would be terrifically expensive. Assuming that the goal of UBI is to ...
1
vote
1answer
124 views
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 ...
-1
votes
2answers
45 views
Is fiat currency better than a backed-currency?
My question is would it be better if we went back to something like a gold standard but backed by a finite virtual material instead? It avoids the problem of fluctuations in gold supply. The money-...
0
votes
1answer
35 views
Creation of Money - Hypothetical Situation II
Continuation off this line of questioning. If I issue an IOU, it would need to be fungible, transferrable, etc in order to be considered "money." Understood - My follow up questions are:
Remaining ...
1
vote
3answers
66 views
Where is the money that was in the economy pre-lockdown? [closed]
Countries are in lockdown, companies have no customers and thus no income.
They have to lay off staff which in turn means ex-staff have no income. Everyone simultaneously and quickly depletes any ...
3
votes
3answers
76 views
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.
...
-2
votes
2answers
55 views
What is the Federal Reserve's “money printing” impact on inflation
In wake of Coronavirus, when the Fed announces it is printing \$2.2T, what is the impact on inflation?
Does the M2 increase by \$2.2T? (Thus a 12.5% increase in inflation? That can't be right?)
Is ...
1
vote
3answers
41 views
Why is the Dollar Index strong after the Fed dropped the Fed Fund Rate?
I have a query about the current forex market. In 16 March 2020, the US Federal Reserve Bank announces to cut the interest rate to 0%. This move supposedly weaken the Dollar Index, but why for a ...
1
vote
1answer
109 views
Can stimulus packages lead to hyperinflation?
I have a limited understanding of economy, however, I've been trying to catch up from various resources. Recently, the news are all about the enormous stimuli bills debated/implemented by governments ...
1
vote
1answer
77 views
Question about Federal reserve open market operations - reducing money supply
I'm trying to understand how open market operations work to reduce money supply.
So the Federal Reserve sells bonds... when this happens, the bank balances of the bond-purchasers goes down... the ...
0
votes
0answers
17 views
How does the central bank's purchase of the domestic currency lead to an increase in the domestic interest rate?
Consider the following scenario:
The Hong Kong Dollar has been pegged to the US Dollar since 1983. If, for example, the US tightens monetary policy by raising interest rates, this will cause ...
0
votes
0answers
18 views
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?
1
vote
1answer
27 views
Liquidity Trap Question? Return to equilibrium
As far as I inderstand a liquidity trap occurs when increasing the money supply is not able to stimulate the economy because people prefer hoarding the cash rather then investing in debt securities ...
0
votes
0answers
31 views
On example of “eurodollar” creation
The following example is supposed to be from Milton Friedman,
This is supposed to illustrate the creation of "eurodollars", the claim is that there is a supply of 900 extra dollars in the global ...
0
votes
1answer
18 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 ...
0
votes
0answers
14 views
How would M2 and Velocity of M2 be affected if balance sheet expansion continues long-term?
Let’s assume that the Federal Reserve does NOT discontinue injecting liquidity into the Repo market but, instead, continues a long-term policy of continuous and regular liquidity injections. Let’s ...
0
votes
1answer
23 views
Any drawback from printing money to pay for national services such as the NHS? [duplicate]
Why can't we just print money to build national infrastructure services such as an additional hospital for the NHS? This would create growth, allowing more doctors and nurses to come through but more ...
1
vote
1answer
52 views
Does a negative interest decrease the money supply?
If there is less money, its value increases.
There is less liquidity when there is less money.
Does a negative interest decrease the money supply?
Especially when people don't need money: they saved ...
0
votes
1answer
83 views
Velocity of M1 versus M2 money
According to Pablo Kurlat's textbook on Macroeconomics, the graph of Ch 13 compares the velocity of M1 and M2 over the years. I don't understand why M1 velocity exceeds M2 even though M2 includes more ...
0
votes
1answer
69 views
Can government just print a little of money to purchase some foreign resources?
We know that government shouldn't just print money, because it's gonna be bad. Bad what if to do it in a small scale, just a little, for example to hire some scientist (probably nothing gonna happen ...
1
vote
1answer
29 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 ...
0
votes
1answer
51 views
Why aren't open market operations a zero sum transaction?
I know that when the Federal Reserve buys Treasury bonds it increases the money supply, but I don't understand the process behind it. The model that I have given below (which is my best understanding ...
2
votes
1answer
46 views
The Fed Lowered Interest Rates, Are they going to buy Bonds?
I originally asked this question on personal finance/money because I didn't know that this exchange site existed. link to same question at person finance/money. Someone on that site mentioned that it ...
1
vote
3answers
121 views
LM curve: How interest rate is changing without OMOs by the central bank?
The following is the gist from chapters - 3, 4 & 5 dealing with IS-LM model from Macroeconomics, Blanchard & Johnson, 6th edition.
Equilibrium in the financial market implies an increase in ...
1
vote
2answers
51 views
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 ...
3
votes
2answers
219 views
Why has M1 grown a lot faster than M3 after the financial crisis?
While the fed has printed a lot of money the last decade and the M1 money quantity growth rate has gone up significantly (red), the M3 growth rate (blue) is almost exactly the same as before the ...
1
vote
1answer
69 views
What is the upper limit of circulating money on earth?
I've come up with this question while discussing the topic of customer-perceived value with coworker.
Is there a theoretical upper limit to all circulating money in this world?
To avoid inflation ...
0
votes
1answer
71 views
A hypothetical question on neutrality of money
Let's assume that we start with an economy producing two goods, A and B, with each priced $100. Each good is weighted using the same quantity, so CPI equals 100. Nominal wage is also 100 dollars. An ...
0
votes
0answers
26 views
Which assets beat the injection of money and why?
Suppose a world in which every year $1.03 ^ Y$ liquidity is injected.
Which assets could perform better than 3% per year?
Growth forecasts for these?
1
vote
1answer
111 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 ...
3
votes
2answers
57 views
Quantity theory of money: microfoundations
The quantity theory of money states the price level is proportional to the amount of money in circulation. That is, if the quantity of money increases by some factor $k$, the price level will increase ...
0
votes
1answer
51 views
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 ...
0
votes
0answers
12 views
What is the effect on money multiplier of the following three cases?
Assuming ceterus paribas in each case:
(i)The bank expands its operations in the field of financial derivatives.
(ii) Increasing competition leads to a fall in the transaction costs incurred by ...
1
vote
0answers
13 views
Difference between IS curve viewed by Keynes and by Friedman
In my economics lectures, we are going through Keynes vs Friedman. As far as I got we have a downward sloping IS curve in the IS-LM model. We get this curve from the Keynesian cross when the rate of ...
-1
votes
1answer
64 views
How do people check or trust that central bank is not cheating? [closed]
How people can be sure that somebody, cooperating with central bank (or working in it), is not creating money in digital or paper form for themself, so that nobody else notices it?
2
votes
0answers
80 views
Effect of Import Tariff on Supply of Currency on Foreign Exchange Market
I'm struggling with this question below for my macroeconomics course.
If Argentina were to impose a tariff on its imports, how will the supply of Argentina's currency and its exchange rate be ...
0
votes
1answer
42 views
The value of money in a model economy. Has this been addressed?
Consider the following question:
"Given a simplified economy which produce and trade some products A,B,C etc... with N agents and a total money supply of M. What will be the price of A, B, C as ...
2
votes
3answers
132 views
How important are capital requirements for controlling broad money supply?
Interestingly, the Bank of England (BoE) is one of the few central banks that does not have reserve requirements.
Canada, the UK, New Zealand, Australia, Sweden and Hong Kong have no reserve ...
1
vote
0answers
29 views
What is the impact of money “sent” to another country?
I've been thinking about this a lot and I am not sure I have understood correctly. I was thinking about, for example, migrant workers who send a portion of their income back home, or wealthy ...
6
votes
1answer
111 views
Why are banks allowed to resell mortgages?
It just seems like a way to get around money creation limits imposed by liquidity requirements. For example if a bank creates new money by extending new morgages then securitizes them and resells them,...
0
votes
1answer
38 views
Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?
Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?
I understand that to increase the money supply, the ...
0
votes
1answer
115 views
Nominal vs real growth of monetary base
Can someone clarify the difference between nominal and real growth of monetary base? I believe it is the policy of some central banks to target for example 0% nominal growth in the monetary base. What ...
1
vote
0answers
29 views
How does the central bank fund open market operations?
This may seem like an extremely simple question, but I have been unable to find any satisfactory information on this.
How, practically, does the central bank generate the funds to purchases ...
-1
votes
1answer
126 views
Would taxing money owned (as a share of purchasing power) be a better form of taxation?
Consider a nation whose money is entirely digital (like Bitcoin), but centralized (unlike Bitcoin). Furthermore, the total money supply is fixed, i.e. money cannot be created nor destroyed. To be ...
3
votes
4answers
192 views
Does Bad Money Drive Good Money Out Of Circulation
I have heard the saying, "Bad money drives good money out of circulation," (Gresham's Law) many times.
I'm wondering if it's true, what it really means. What's good money? What's bad money?
And if ...
1
vote
2answers
69 views
Why did it take so much QE by the ECB to raise the Eurozone inflation to 2%?
From 2015 to 2018 the ECB increased the money supply by around 20% (around 6% y/y), with a GDP increase rate under 1%. Yet the inflation rate remained under 2%. A back-of-the-envelope calculation ...
3
votes
0answers
6k views
Did the robbers from Money Heist real steal noone's money?
Money Heist (original Spanish title: La Casa de papel) is a Spanish TV show about a bank heist.
From Wikipedia (bolding mine),
In Money Heist, a mysterious man, known as "The Professor", is ...
2
votes
2answers
59 views
Change in money supply
Suppose a bank makes a loan of $1M to someone taking out a mortgage to buy a house by crediting that person's bank account with a deposit equal to the size of the mortgage. Suppose the required ...
0
votes
1answer
124 views
Wealth Creation: Where does the money come from?
I'm trying to better understand wealth creation– let's use trade as an example.
I've bought a cup for \$2 and sold it for \$10. We've "created some new wealth" there– but without a net increase in ...
0
votes
2answers
86 views
What does it mean to “print money”?
In my intro macroeconomics course, my professor tried to emphasize that the money supply changes ONLY by increasing or decreasing lending activity. However, I feel like he was trying to focus on ...
