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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13
votes
3answers
677 views

Destroying the dollar

Let's destroy the USD dollar: I am the government of a small, economically and geopolitically unimportant country that has its own currency and a local central bank. I order the local central bank (at ...
6
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3answers
221 views

Fractional reserve banking and the value of someone else's currency

Suppose there are two countries: $A$ and $B$. $A$ is a large, stable, democratic country with its own currency, the dollar. $B$ does not have its own currency. All prices and financial transactions in ...
6
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4answers
8k views

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 ...
16
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4answers
4k views

Why is fractional reserve banking allowed?

I learned about banks' fractional reserves and that revolted me. How is that not considered to be fraud? The idea doesn't seem too sophisticated, on the contrary, it sounds very simple: the bank ...
3
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1answer
126 views

Reactions of the Money Market

Here's the image of a money market with two different money supply and demand curves: Here are some questions regarding money market reactions. I'll always write my proposed reasoning underneath each ...
4
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0answers
56 views

How exactly do Participatory Notes induce volatility into the economy?

I was reading up on participatory notes. Wikipedia defines these as "instruments issued by registered foreign institutional investors (FII) to overseas investors, who wish to invest in the Indian ...
8
votes
3answers
323 views

What determines the exchange rate of two fiat currencies if the supply of each is known?

In this blog post, economist Steve Landsburg posed a question about the value of Bitcoin which he didn't know the answer to. Imagine a future in which Bitcoins (or some other non-governmental ...
8
votes
1answer
211 views

Restricting “money creation” to the central bank [duplicate]

Iceland is considering removing "money creation" from commercial banks. [Despite the date of the article, I don't think this is a joke, as it has been picked up in other places since without anyone ...
1
vote
1answer
61 views

How to determine the worth of a good

I've searched around the web for awhile now and I'm beginning to think this might be an unanswerable question. I want to know if there is a theoretical way to determine the worth of a particular good, ...
1
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0answers
175 views

How does a country increases or decreases it currency value (exchange rate) against other nations currency?

I want to know how a country, Mexico for instance, keeps the exchange rate higher or lower against other nations currency, USD, EUR, JPY. How does the value of a nation currency is valued against ...
4
votes
1answer
274 views

What if only the government could create money? [duplicate]

If I understand correctly, under the dominant system of fractional reserve banking, many (all?) private banks can create money by lending. See, for example, Implications of abolishing Fractional ...
4
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2answers
4k views

What effect would raising reserve requirements while printing money have?

It is generally accepted, that printing money will be inflationary, as it increases the money supply without a corresponding real growth of the economy. At the same time, if the central bank ...
5
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6answers
2k views

Does the money's “Store of value” function actually exists?

I'm aware of the following four functions of money: Medium of exchange. Measure of value (in dollars, pounds, etc.) Standard for exchanging goods (guaranteed by the Fed) A Store of value (as an asset)...
5
votes
1answer
86 views

What impact did monetary policy actions taken during the Great Recession (2007-09) have on U.S. economic performance?

What impact did monetary policy actions taken during the Great Recession (2007-09) have on U.S. economic performance? Quantitative easing and unconventional policy actions such as asset purchases and ...
5
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2answers
164 views

Unlimited supply of national currency?

I was reading this article about Denmark central bank defending its currency peg: http://www.bloomberg.com/news/2015-01-22/denmark-cuts-key-deposit-rate-to-minus-0-35-to-drive-down-krone.html In it ...
2
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1answer
162 views

Is Dollarization a good decision for a small open economy with an economic cycle that weakly correlates with the anchor country?

I have been reading the work of Alesina http://scholar.harvard.edu/files/alesina/files/dollarization.pdf, about the pros and cons of dollarization (i.e. adopting the currency of other country, say the ...
10
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3answers
900 views

What is the calculable effect of counterfeiting on an economy?

I'm curious whether one can numerically calculate the effect that counterfeiting has on an economy. As I understand it, counterfeiting essentially amounts to theft of the wealth of everybody holding ...
8
votes
2answers
6k views

What is the advantage and disadvantage to have a high value of USD for USA?

What is the advantage and disadvantage to have a high value of USD for USA? China and Japan always want to keep their currency low as oppose to USA.
6
votes
2answers
189 views

How might the Swiss currency floor be unwound?

The Swiss National Bank has been enforcing a currency floor since 2011, not allowing the EUR/CHF rate to drop below 1.20 by buying unlimited amounts of foreign currency as needed with newly created ...
15
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5answers
1k views

Implications of abolishing Fractional Reserve Banking on mortgages and interest rates

Suppose for a moment that someone with legislative power decides to abolish Fractional Reserve Banking and passes a law that forces banks to only lend the money they own, that is M0. What would be the ...
8
votes
3answers
568 views

Inflation, cause or result of monetary emission?

The argentine economist Fernanda Vallejos, while trying to protect the government because of the inflation, the following: Inflation is not the result but the cause of monetary emission. As there'...
0
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1answer
297 views

What is the impact on the money supply of a reduction in the required reserve ratio? [closed]

In April 2011, the money supply was estimated to be 52 million hurls. At the same time, bank reserves were 6.24 million hurls and the reserve requirement was 12 percent. The banking industry, being “...
4
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1answer
85 views

When and to what extent should the money supply of a pegged currency be included in the “parent” currency?

For example, the Manx pound is in a de facto currency union with GBP. The Isle of Man Bank chooses to back IMP one-to-one with Bank of England notes, but is not legally required to do so. At one-to-...

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