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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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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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 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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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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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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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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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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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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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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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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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 ...
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Why can't a government print money to pay its debt?

I have written an explanation to one of the famous questions "why can't government print money to pay its debt". Is my explanation correct? Is this the similar situation which happens in ...
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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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What are some of the good textbooks on Modern Monetary Theory and the Development of Monetary Theory?

I am trying to study modern monetary theory for my research. Recommendations, please? Thank you!
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Under the gold standard, how did the redemption of gold work in practice?

For example, in the US: In 1834, the United States fixed the price of gold at $20.67 per ounce, where it remained until 1933. (EconLib) Does this mean that anyone with US\$20.67 could walk up to ...
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Why doesn't Nintendo fire up the old factories and re-produce *exact* copies of many of their most popular games, controllers and consoles?

Let's suppose that Nintendo announce tomorrow that they are going to create exact re-releases of the American and European NES, SNES and Nintendo 64 consoles, exactly the same as when they were ...
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On what basis, is currency created?

This is more like a homework question. I am quite a beginner. I would appreciate any help, preferably with less technical terms, that guides me in the right direction. I went through the Wikipedia ...
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Is money a conserved quantity?

Excuse the naïve question, but I have a rather limited understanding of economics, and this question has been bothering me since my school economics teacher couldn't answer it satisfactorily many ...
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How is reserve money 'multiplied' by the banking system?

I'ma an econ newbie so please forgive my lack of understanding. I am confused as to how the money multiplier effect works. I get that the money multiplier effect doesn't actually hold true as banks ...
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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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What would happen if, hypothetically, money velocity would reach infinity?

If, hypothetically, money velocity would reach an infinite speed, what would happen to that economy? If it would be infinite then it would mean that there would be infinite transactions and therefore ...
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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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What's wrong with printing more money [duplicate]

Suppose a government is in debt, why will there be inflation if it makes more money and pay other countries borrowed money back?
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Why does fiat money have value?

Or as Tobin (1992) put it: "How Can Money Have Positive Value in Exchange?" Money, however, is an embarrassment to value theory. According to standard theory, something can have positive ...