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.
0
votes
0answers
19 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
88 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
0answers
20 views
Distribution function for number of people owning x in assets by country
I would like to know, where I can find, for each country, the graph of the following data distribution:
On the x-axis, money amount, in thousands dollars or other currency.
On the y-axis, for graphs ...
0
votes
1answer
30 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
36 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
18 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
75 views
Would this alternative monetary and tax system work?
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
48 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
55 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
117 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 ...
0
votes
1answer
34 views
USA exporting inflation
I would like to ask if my understanding is correct: the US Government(more specifically the Fed) can print however much money it wants as they can easily export the inflation since many countries use ...
0
votes
1answer
19 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 ...
1
vote
1answer
52 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
26 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 ...
-2
votes
1answer
44 views
Why don't we mint more m0 instead of creating m1 through fractional reserve banking?
From what I understand, m1 money is just as liquid as m0 since an individual can withdraw it from the bank at any time and in any quantity (up to the amount (s)he deposited). Because of this I don't ...
-1
votes
2answers
82 views
Why doesn't the central bank extend loans directly?
I've been thinking about the credit theory of money lately and how it creates money. Since Banks look for sufficient reserves after extending a loan, and since the central bank always loans out money ...
0
votes
4answers
76 views
Understanding interest rates
When a central bank 'pays' interest rate X / year, what does it mean exactly? Is that pure money printing? Where does that money (interest rate) come from? does it increase the debt of the country?
A ...
2
votes
1answer
57 views
Why hyper-inflation?
I understand the $MV=PQ$ identity. I also understand the benefit for the government in some cases to having non increasing over time (even if high) values of $\Delta P$ (stealth tax & seigneur-age ...
2
votes
1answer
23 views
How does the money supply grow in the long term?
For inflation to happen at roughly 2%/yr and for people to trade the same (or higher) volumes of goods, people must be trading more money. For such a trend to exist in the long term, there must be ...
4
votes
1answer
39 views
Intuition behind Real Money Demand and Real Money Supply
Standard undergraduate textbooks begin with an exposition of the money market with the following equilibrium condititon:
$$\frac{M^{s}}{P}=L\left(R,Y\right)
$$
In the above, the LHS is what is ...
0
votes
1answer
50 views
Can the Fed raise the M1 money supply permanently w/o helicopter money?
I just read parts of an introductory economics book. I read about the monetary system in the U.S. and came up with the following question:
Can the Fed raise the M1 money supply permanently without ...
-1
votes
1answer
58 views
Cons of printing more money but not injecting in the system directly
So I don't know if this might be the right place, if it isn't I'd appreciate if anyone can link me to the right place. Anyways here is the question.
I've read up on what are the cons of printing more ...
0
votes
3answers
51 views
Will periodical increasing and decreasing cryptocurrency supply peg cryptocurrency to dollar effectivelly?
As far as I understand, in order to make cryptocurrency pegged to USD we need somebody to take the risks of exchange rates. So, if ratio CRYPTO to USD is at a given time 1CRYPTO:1,1 USD, then we ...
0
votes
2answers
38 views
What would be the effect on the economy if the United States legalized counterfeiting?
If today the United States legalized counterfeiting, what would be the effect on the economy? The counterfeit must look authentic to be legal, thus requiring some skill.
-1
votes
1answer
52 views
Question on money supply related to new crypto project
Following questions are related to a crypto project I am working on and proper answers are of utmost importance to this concept's development. I unfortunately lack expert knowledge about money supply ...
1
vote
0answers
13 views
How does changing the Bank of England base rate work?
If we assume the demand for money (D above) is fixed in this position (for the purposes of this question), and supply (S) is fixed in this position, then how can the BoE change market interest rates (...
-1
votes
1answer
110 views
How does a decrease in money supply affect price levels and Real GDP in the short run?
Specifically, when a short run AS curve is positive, how does a decrease in money supply affect price levels and Real GDP in the short run?
Thank you!
2
votes
1answer
43 views
What is the actual numerical value of the velocity of money?
All the discussions of the velocity of money that I've come across (e.g. here, here, and here) only display relative changes in the velocity of the money (e.g. by normalizing it by an unspecified ...
1
vote
2answers
123 views
What is the effect of expansionary fiscal policy in case liquidity trap situation?
I've read that liquidity trap means interest rate is at its minimum and increase in real money stock will not lead to fall in interest rate because people will be demanding whatever the amount is ...
0
votes
1answer
37 views
Can the amount of loans and deposits in entire banking system differ significantly?
Can the amount of loans and deposits in entire banking system differ significantly?
When regarding the entire banking system, what factors impact the loans to deposits ratio? Is it roughly constant ...
2
votes
1answer
44 views
Why does changing the value a currency help/hurt exports if sellers can just inflate/deflate prices to match the change?
1) I make widgets and sell them for $10.
2) The government reduces the value of my currency by 10%.
3) The market value of my widgets is the same as before, so I raise my
prices to $11 and I can ...
3
votes
0answers
112 views
Friedman's version of money multiplier formula
In his Quantity Theory of Money article M. Friedman uses the following formula for the money multiplier: $$ M = H \times \frac{\frac{D}{R}(1 + \frac{D}{C})}{\frac{D}{R}+\frac{D}{C}} $$
where $M = $ ...
0
votes
2answers
66 views
Considering how USD enters the market, is the USD actually unbacked? Could the USD represent a unit of a “fund” of securities held by the Fed?
From my understanding, all new money enters the market either 1) by the Fed lending it to banks, so the Fed essentially owns bonds in the exchange, or, 2) The Fed purchasing other financial assets. So ...
0
votes
1answer
73 views
Does Not Having a Fractional Reserve System Cause More Inflation?
It is my understanding that countries without fractional reserve requirements still have capital requirements, but what I do not understand is how equity can be used to satisfy these requirements ...
2
votes
0answers
16 views
Theoretical - Direct Money Supply model
The following question is based on a hypothetical scenario, in which the goal(s) is/are to identify how system participants may use/abuse the system to their benefit.
You are in the fortunate ...
-1
votes
1answer
83 views
Inflation and stock price
I have indicated my understanding and problem on the attached image below. I'm a bit confused on the impact of inflation on stock price. As increase in inflation would cause nominal interest rate to ...
1
vote
1answer
31 views
Does money neutrality mean that nominal GDP (output) changes following changes in money supply?
If money neutrality stipulates that only nominal variables will be affected following changes in money supply, then does this mean that following such money supply changes, real GDP remains unchanged ...
1
vote
2answers
560 views
interest rate and money supply
When the interest rate increases, I learned that money supply decreases because people put their currency back in banks in forms of assets and tend to save more, spend less.
However, money supply ...
1
vote
0answers
278 views
Money Neutrality and Real Interest Rate
I learned from the Fischer Effect that
Real Interest Rate = Nominal Interest Rate - Inflation Rate .
But in today's class the professor told us that due to money neutrality, an increase in money ...
1
vote
4answers
284 views
The sequence of Money Supply - Interest Rate
Until now I've learned that the Fed controls the interest rates and that affects the money supply. For instance,
The Fed increases Interest Rate ----> makes firms/households reluctant to borrow and ...
0
votes
3answers
260 views
Why doesn't the government create money, spend it for free without interest, and recollect it with taxes?
I was thinking of a better monetary system, and here is what I came up with it. I'd like to know if this would work, as I see if offers many advantages over our debt-based monetary system today.
A ...
2
votes
0answers
38 views
Does Fannie Mae get money from the FED
Does Fannie Mae directly or indirectly get money that is printed from the federal reserve to buy mortgages, or have they ever? If so, when has this happened? How much money? What is the process by ...
3
votes
2answers
298 views
What are the logistic implications of using bottle caps as currency?
I have recently been playing the game of fallout 4 and I was struck by an interesting spec of the game.
People in the nuclear post-apocalyptic world use bottle caps as barter money.
Inquiring a ...
3
votes
0answers
47 views
Why is money super neutral in Brunnermeier and Sannikov's I theory of money?
I'm wondering why money is super neutral in Brunnermeier and Sannikov's "I-theory of money", but is not super neutral in their 2016 AER paper "On the optimal inflation rate".
In the I-theory of money,...
3
votes
2answers
662 views
Why are there (still) coins?
I find coins extremely inconvenient to carry and count. I feel I'm not the only one to find them annoying and inconvenient.
What are some economic reasons why all cash money isn't paper and coins ...
4
votes
1answer
3k views
Why is money in circulation a liability of the central bank?
We know that the money today is fiat currency, that it is money because the government says it's so. So when new money is printed or loaned out to the commercial banks by buying treasury bonds, ...
0
votes
1answer
207 views
Would this alternative to fractional reserve banking work?
While reading the answer to Implications of abolishing Fractional Reserve Banking on mortgages and interest rates, I started to wonder if there wasn't a simple solution to the problems that would ...
6
votes
3answers
2k views
Is the Federal Reserve issuing money in a fair way?
Basic logic says that, once a central bank is issuing new money for increasing the money supply, the money should be distributed fairly between all the citizens, and that means giving them all an ...
1
vote
2answers
97 views
When the ECB does QE, does it print new money?
I knew that when the Fed in the US buys bonds through Quantitative Easing, it does so using money it has from previous profits and that it doesn't print new money.
However, I was reading this article ...
1
vote
1answer
29 views
Other factors that affect the supply of money
I've read that it is not a hard-and-fast rule that the overall money stock growth rate speeds up in response to an accelerated expansion of the monetary base and a growing money multiplier. If this is ...
