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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How does the money supply behave when bank loans are repaid?
In a fractional reserve system when banks lend out money, that money is created out of thin air by a accounting journal entry, and the money supply goes up by the amount of the loan & when the ...
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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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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 ...
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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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Bond market downturn - how does money supply change?
When people are pessimistic with bond-holding due to the bearish bond market, chances are high that they would change the ratio of portfolio (i.e., increase the ratio of money, decrease the ratio of ...
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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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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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Is it true that the Federal Reserve is not federal and has no reserves?
The Money Masters is a 1996 documentary film that discusses the concepts of money, debt, taxes, and describes their development from biblical times onward.
Its main points were summarized by a ...
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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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What would be the effects of an expiration date on currency?
Let's say we introduce a monetary system where each piece of money is printed with an expiration date - a year, perhaps.
I'm imagining something rather different from inflation (although I do not ...
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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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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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Chain effects when Money Demand is greater than Money Supply
Here is an example graph of Money Market Equilibrium
The chain effects when interest rate is 8% are :
Excess Demand for Money => So, People would sell Bonds => Bond Prices goes Down => ...
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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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Why do banks take deposits if they do not need them to make loans?
I have taken some economics courses in university, where I was introduced to fractional-reserve banking. From my understanding, in fractional-reserve banking, the bank has motivation to encourage ...
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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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Is new money created when banks buy Treasury Bonds in primary auction?
From my understanding of the current monetary system when a bank issues a loan it is effectively creating money for the receiver of the loan i.e Mortgage. This increases the M1, M2, M3 numbers of the ...
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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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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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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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long run growth of money supply
I am trying to understand how the money supply (bank deposits + currency) grows over time (in the long run).
start of edits
I am not asking 'how do we know it grows?' or other high-level observations ...
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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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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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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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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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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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What Happens to Govt Securities on Central Bank's Balance Sheet on Maturity?
To properly clarify the motivation of the doubt think of a hypothetical world when there are no business cycles and Central bank intervenes in the market only to provide enough liquidity to sustain ...
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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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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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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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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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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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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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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 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
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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