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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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69 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 ...
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1answer
91 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 ...
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0answers
19 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 ...
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1answer
90 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 ...
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1answer
40 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 ...
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2answers
753 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 ...
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0answers
380 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 ...
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4answers
922 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 ...
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3answers
355 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 ...
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0answers
41 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 ...
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2answers
499 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 ...
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0answers
56 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,...
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2answers
1k 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 ...
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1answer
5k 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, ...
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1answer
258 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 ...
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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 ...
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2answers
107 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 ...
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1answer
34 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 ...
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1answer
70 views

Why did the rate of money supply growth accelerate from 1993-96 in the United States?

Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
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3answers
589 views

Basic Reason of Why the Money Supply Needs to Increase? [duplicate]

Hello, all. So I am trying to gain a thorough understanding of why the Fed, or any other Central Bank, needs to keep pumping money into the economy as it grows. My question is not asking why ...
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0answers
43 views

Why did the rate of money supply growth increase from 1993-96 in the United States?

Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still ...
2
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1answer
196 views

Is it valid to compare cryptocurrencies by using their smallest divisible unit?

I'd like to compare the relative value (in USD) of three cryptocurrencies: Bitcoin, Ethereum, and IOTA. (See spreadsheet below.) Specifically, I'm comparing the price of each currency's smallest unit ...
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2answers
1k views

Why is M0 higher than M1?

In my understanding, M2 includes M1 and M1 include M0. However, I checked the money supply here and used the "Compare" function to compare the money supply of m0 with money supply of m1, and found ...
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1answer
122 views

Forward Guidance - What happens when the FED unloads its balance sheet

Please Excuse my ignorance. The US Federal Reserve has issued forward guidance telling the world that it is going to start to sell its (well a little less) 4.5 trillion dollars worth of securities ...
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2answers
3k views

How exactly does money supply causes inflation?

I think there's consensus among economists that a growth in money supply (I'm not thinking in any particular type of money supply) causes inflation (CPI), at least, in the long run. What I'm ...
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1answer
62 views

Causality: Money supply and prices

When there is an increase in price level, real money supply decreases and raises interest rates. In a similar situation, when money supply decreases, interest rates increases, consumption decreases, ...
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1answer
41 views

exchange rate and domestic money supply part II

This question is related to the answer to the question exchange rate and domestic money supply It is said that the 'CB purchases foreign currency on currency market'. Is it possible that some of ...
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1answer
731 views

Exchange rate and domestic money supply

It seems an obvious fact (not explained by authors but stated) that when a Central Bank purchases foreign currency (to stabilise its own), the domestic money supply goes up. It seems to me that the ...
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2answers
1k views

How does reverse repo rate affect money supply?

What is the impact of increase/ decrease of reverse repo rate on Monetary Base, Money multiplier and therefore, overall money supply?
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2k views

How does reducing government spending increase the money supply?

According to the following question, it seems as though cutting back on government spending increases the money supply (the answer is C). The only possible explanation I can think of is that in the ...
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2answers
1k views

Fisher Effect vs Quantity Theory of Money and how an increase in the money supply lowers interest rates?

I was under the impression that in the long run, a larger money supply resulted in lower interest rates. According to the Quantity Theory of Money, see below figure, an increase in the money supply -> ...
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3answers
73 views

Why not just look at the money supply to calculate inflation?

I see a lot of debate about the right measure to use to determine inflation -- apparently the CPI overstates it, etc. Why not just subtract the GDP growth rate from the money supply growth rate (or to ...
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0answers
40 views

When in the history the governments issued non-cash money first?

I understand that the Federal Reserve is issuing money in the form of deposits. Those deposits "are not cash but they are money: they can be used for payment (at which point they become somebody else'...
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3answers
132 views

Can everyone in an economy profit?

I earn a salary, but, like many American workers, I don't spend all of it -- I stash away some in the bank. This is a good thing, since I can one day retire (stop producing), and still live ...
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1answer
47 views

Elucidation needed on textbook's description of the effect of increased Interest rates on the money supply curve?

A textbook, when explaining the effects of higher interest rates, claims that: The initial equilibrium is with real output at $Y_0$,the price level at $P_0$ and the rate of interest $r_0$. An ...
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4answers
12k views

Does an increase in the money supply increase or decrease interest rates?

What I understand is that an increase in the money supply brings about a fall in interest rate as there is more money available, the price of money will be cheaper. But some theory such as liquidity ...
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2answers
523 views

What happens if money supply grows more slowly than inflation?

I'm thinking the case of Argentina. In 2016, prices raised about 40% but according to the central bank of Argentina, money supply grew only 30%. Is this going to have an effect in 2017? What could we ...
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2answers
532 views

Money supply M0 and M1 data for students

Its my first time on economics xchange. I am a student of M.Phil. Economics 1st semester. I am writing a term paper and I need some data. I am looking for money supply M0 and M1 data for top 50 ...
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698 views

How do central banks regulate the money supply to avoid inflation?

It is a tricky problem. Historically, poor control money supply led to inflation. Out of control money supply led to hyperinflation. Central banks seem to do a wonderful job in recent years with ...
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1answer
248 views

Finding the money supply graph for the UK

I have been trying to find a reliable source for the UK money supply over the past couple of decades, but it seems that in each different place I look I get completely different looking answers. Now I ...
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1answer
63 views

Given fractional banking and the multiplier effect, for every dollar in circulation, how many dollars in spendable money exist?

The fractional banking system, in a nutshell, allows banks to invest the money deposited in them, and then for whoever ends up with that invested money to deposit the money back into the bank, which ...
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1answer
360 views

What effect would destroying large amounts of physical currency have on government finances

India has recently recalled high denomination notes and asked people to deposit the physical currency in old notes in their bank accounts. People who have unaccounted wealth are resorting to ...
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1answer
54 views

If I want to create my own currency model what would be the best basic options / things / ideas I need to look into? [closed]

First of all, I am from a IT background and currently writing my thesis on a system in which I am have to create a model of a nation. So to run the economy in this simulation (for now you can ...
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0answers
49 views

Does only enough money exist to pay the principal on all debts, and none for the interest or for anything else?

This is reported to be the testimony of Marriner Eccles, Governor of the Federal Reserve Board, before the House Committee on Banking and Currency, on September 30, 1941. Does this mean that only ...
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2answers
921 views

Gold coins as currency?

My question is about gold standard. But not the version I always see mentioned (trading bills for gold at a set price). I mean having gold coins in circulation. For example, new currency consists ...
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3answers
437 views

Is a shrinking money supply environment painful for an economy?

During the great depression the money supply in the US fell by about a third. It is my suspicion that any economy with a falling money supply will generally be doing badly but of course I could be ...
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1answer
378 views

If banks create money by lending it out, how are they taking any risk?

When I lend money to someone and they don't pay it back, I lose my money. I can only lend out money that I own (or borrow). I understand that when a bank lends money, that money is created the ...
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2answers
55 views

What will happen if the government not print money?

I already post this question in Money.SE, but I need to transfer the question in to this site because it's off-topic... As I said in my previews post. I start researching the reason why the ...
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3answers
1k views

What is the effect of Quantitative Easing on the US budget deficit?

Is the deficit getting larger because of QE?
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32 views

Helicopter Money: a tax on banks?

In this text of voxEU, the author are trying to explain why helicopter money will not have it's expected effect. For that conclusion they try to explain the different schemes on how Central Banks pay ...