Questions tagged [money]

any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context, or is easily converted to such a form. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered as money.

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Money transfers from A to B - in what proportions

I have been thinking about how money is kept moving, being transferred from A to B. And when I say A to B I don't just mean purchasing finished goods, I mean absolutely any transfer for any reason. So ...
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Real Income and a Fixed Money Supply

What would happen to nominal income and wages if the money supply were fixed (100% reserve banking). Would real wages increase, even though nominal wages would stay the same or even decrease?
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Why do we need to borrow?

(I have super limited knowledge with economics/finance/etc so please forgive me for any misunderstandings or misrepresentations.) Why do we need debt? People who make profit by lending to others don't ...
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117 views

Fed must hold collateral equal in value to notes in circulation

The Fed's website has a FAQ "Is U.S. currency still backed by gold?". Part of the answer writes: The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the ...
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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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What is the difference between money and currency?

Is money an intangible concept and currency a way to make it physically present? If not, then what is the difference?? Please dont duplicate it as i have read other answers and then asking.
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Was there any currency backed by other metals than gold, silver or copper?

Was any other metal than gold, silver or copper ever in history used to back a currency?
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How does the private bank reserve increase when money is being withdrew?

The federal government raises 400 million by selling bonds to the general public in order to pay for a construction program. The program cost 440 million so the government withdraws 25 million from ...
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Who first described/coined “velocity” of money?

Restatement: Who is responsible for originating the term “velocity” to describe the rate of money circulation? Also, who is responsible for first discussing this rate, specifically? Background: While ...
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How does the size of the largest cryptocurrency compare to the largest traditional currency?

'Money' has evolved throughout economic history, and has included moving from: barter economies (i.e. no 'Money' - simple trading of final goods/services) commodity money - money whose intrinsic ...
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4answers
263 views

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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Has anyone developed a good methodology for high-frequency inflation nowcasting?

Let's say I want to know what happened to the value of the U.S. dollar between three minutes and two minutes back from ... NOW. I have given myself a two minute slack period for data collection and ...
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Is Iranian rial going to get boosted?

I was reading about the Iran's economy and Iranian rial. I have read the news regarding the lift of sanctions from Ira, which had allowed the purchase of Iranian rial in America. I was having query ...
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Why are the financial intermediation theory of banking or fractional reserve theory of banking still accepted despite evidence to the contrary?

In most textbook economics I came across the financial intermediation theory of banking and the fractional reserve theory of banking are presented as theories as how money is created. However there is ...
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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?
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Are US federal reserve notes money, or merely currency?

I have heard from my friend that US federal reserve notes (aka dollar bills) are not actually money, but merely currency. He told me that money and currency are different, and that money is currency ...
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Would a fair distribution of wealth from the super rich increase the purchasing power/life quality of the average person?

I will start by saying that I do not have any background in finance and that the following question might be very much naive, but it has been bugging me for a while now. The general narrative seems to ...
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Time series for contrasting empirically money demand and Taylor rules series

Non-cashless New-keynesian models often include discretionary monetary policy expressed as a Taylor rule: $1+i_t = (1+i)\left(\frac{1+\pi_t}{1+\pi}\right)^{\phi_\pi}\left(\frac{y_t}{y_t^n}\right)^{\...
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How can money have a value? [duplicate]

The value of money can be the value to produce it. It costs, say, 1, to produce 10 000 000, in the mean (coins and paper, though digital money costs virtually nothing). This is called the extrinsic ...
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1answer
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How to obtain real money balances data

Theoretically real money balances ($m_t$) are defined as: $m_t=\frac{M_t}{P_t}$ Where $M_t$ are nominal money balances, and $P_t$ is the price index of the economy. If I were to make an empirical ...
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Why do different countries have different currency?

Why do different countries have different currency? I have this question because I want to know why to divide it? If it's not divided then we can easily use the money anywhere and we won't need to ...
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People pathologically hoard so much cash that they impoverish the entire nation

"If a man has an apartment stacked to the ceiling with newspapers we call him crazy. If a woman has a trailer house full of cats we call her nuts. But when people pathologically hoard so much cash ...
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Are there any countries in which post-dated cheques are commonly used in trade?

I am reposting from the Personal Finance & Money Stack Exchange because my question was flagged as being about economics and off-topic. The post-dated cheque is the most common payment instrument ...
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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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Interest rate determination in the real world

I have just learnt about the demand and supply framework for money and how the equilibrium interest rate in an economy can be determined. In theory, based on that framework, an increase in nominal ...
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How did the Price/Value of any goods measure in money determined in the first place

Nowadays most value/price of goods and services are determined by the supply and demand in the market. And most of the time we use money which back by the credit/trust of the country to exchange these ...
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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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why is Fed creation of fiat money valid?

some people suggest that the government prints money to pay its bills and that the increased amount of money in circulation lessens the value of $1. i hope to get an explanation of why both ...
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How can a non-fiat currency be backed by gold?

Question is really simple- The value of gold is it self controlled by supply-demand, which insinuates that gold is fiat, only valued because people accept it and not because it has a use case. from ...
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Who owns money?

Bishop Nicole Oresme (1320-1382), in the first monetary treatise, wrote: CHAPTER VI: Who owns the Money? (Cuius sit ipsa moneta?) Although it is the duty of the prince to put his stamp on the money ...
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When a central bank buys government securities, is this exactly equivalent to printing money?

When a country's central bank buys that same country's government securities, is this exactly equivalent to printing money? There seems to be no agreement on this. Federal Reserve FAQ: Is the Federal ...
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Why would a CBDC (Central Bank Digital Currency) be good for the economy?

I've read about CBDC, how it could be a cryptocurrency like digital payment system, that could replace fiat currencies. But what I don't get is what value would it give to the economy? Someone who ...
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How does paying off debt to the bank work?

So, I understand that banks create money by making loans which end up as deposits. But what I don't get, is how paying off debt works in the big picture. Let me explain. Let's say Jim got a loan of \$...
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Why does a decrease in interest rate reduces the velocity of money circulation?

I have seen sources that claim high interest rates increase the velocity of money circulation, but haven't really seen any concrete explanation for this. This is how I think it works: High interest ...
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Is It Possible for a Country to have a Gold Standard without a Fixed Price of Gold?

It is my understanding that at the beginning of the 20th century, many, if not most, countries had a monetary system that was based on a gold standard. However, by the end of the 20th century, most ...
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Why is the money supply perfectly inelastic?

From my notes: We analyze the determination of the interest rate using a supply/demand model relating the interest rate (price of money) to the quantity of money. Since we assume: 1) no excess ...
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Is the debt owed to resourceful producers by resourceless consumers practically irrepayable?

Here is my argument for the debt owned by resourceless consumers to resourceful producers (as currency, bonds, loans, or other means). Is it correct? If not, where am I going wrong? Economic value is ...
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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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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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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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Money creation in textbooks since McLeay et al

The paper "Money Creation in the Modern Economy" by McLeay et al was published in 2014 in the Bank of England Quarterly Bulletin and has had well over a thousand citations. The paper is ...
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When and why did governments impose restrictions on money creation

In many countries governments have made laws that bar themselves from creating money directly. Instead they have to go via a circuitous route involving the creation of bonds. This means that the ...
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How does the fed pump the stock market [closed]

I've been hearing a lot about the fed "pumping the stock market" with trillions of dollars to maintain prices. I know the fed isn't allowed to actually buy stocks so how is this money being ...
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Is the value of a product measured in money a reliable measure of the economic value of this product?

This could rather be a philosophical question but would be curious to know the economist's POV and how these two (value of the product, total economic value of the product) correlate.
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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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How online payment services system work?

Nowadays, online payment services like Transferwise, Payoneer and Paysera have been widely used. It enables people outside US to receive payment from companies. These services gives you a bank account ...
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In which country does my money have the largest purchasing power?

To be honest i have literaly zero economic knowlegde so please treat me as a noobie in this case. Here is the questin: I live in Poland where my native currency is polish zloty (PLN), and i want to ...
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Question on Dichotomous system

In The Classic economy, we consider the following macroeconomic model $$Y=F(K,N)$$ where $F_N>0$, $F_K>0$, $F_{KK}, F_{NN}<0$ and $F_{NK}>0$ $$F_N(K/N)=w/p$$ The labor supply function is $$...
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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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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 ...