All Questions
Tagged with money-supply money
68 questions
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Savings when money market is in equilibrium (LM curve in IS-LM model)
When the money market is in equilibrium, supply of real money balances is equal to the money people hold in hand as liquidity, right? Which means entire real money balance is at hand as liquidity (...
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1
answer
490
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Why must goods in the country will be purchased with the entire money supply in the country?
In russian books it's written that there is balance between commodities and money. And this balance guarantees that all goods in the country will be purchased with the entire money supply in the ...
- 139
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1
answer
982
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Money creation - why do we need deposits and why do banks give out money? [duplicate]
Currently studying elementary economics but there's this one concept that I'm struggling to wrap my head around at the moment: money creation.
The way I understand it, banks can create money "out ...
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1
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3
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370
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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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2
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497
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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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1
answer
85
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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 ...
- 347
1
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1
answer
100
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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 ...
- 347
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2
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90
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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 ...
2
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1
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79
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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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1
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211
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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 ...
- 347
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1
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74
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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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2
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226
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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? ...
- 347
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2
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128
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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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7
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1
answer
571
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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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2
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1
answer
66
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How much money is needed when creating a new hypotethical country?
If a new country is to come to existence as a thought experiment, what determines the amount of money that would be needed to bootstrap economic activities?
This question is more of a prodding ...
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Money-market model: Income rises, bond prices fall. But if income rises, saving increases — in bonds. So why does rising income lower bond prices?
According to the money market model that determines the equilibrium interest rate at which the demand for money in the economy equals the supply of money: when the money demand curve shifts right for ...
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1
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98
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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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2
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2
answers
118
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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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31
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8
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8k
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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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2
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1
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73
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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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3
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4
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2k
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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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4
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2
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966
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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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1
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60
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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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1
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62
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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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2
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61
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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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1
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2
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55
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Can printing money with simultaneous government intervention to increase supply prevent inflation?
Just as above...If we print money and simultaneously introduce some sort of government intervention in order to increase supply/ production, then supply and demand would be 'balanced' and therefore ...
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5
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1k
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How can the stock market keep growing indefinitely?
It sounds like a dumb question, but there is only so much money in the world. Assets can grow, but money can only be printed. So if there is 400 trillion dollars worth of money in the world, and the ...
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1
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1
answer
51
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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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2
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272
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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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1
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113
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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?
4
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4
answers
557
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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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1
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30
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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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1
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1
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81
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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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1
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366
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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 ...
3
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3
answers
127
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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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1
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56
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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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2
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126
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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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2
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479
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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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1
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226
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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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1
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872
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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 ...
1
vote
0
answers
34
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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 ...
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1
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153
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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
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4
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322
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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 ...
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0
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7k
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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 ...
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1
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69
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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 ...
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2
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1
answer
85
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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 ...
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2
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1
answer
117
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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 ...
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1
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70
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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 ...
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2
votes
0
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266
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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 = $ ...
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