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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1answer
22 views

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 happens when a country's central bank significantly reduces the available currency?

The central bank of Iraq has significantly reduced the note count from 55 Trillion to 5 trillion. Logic would dictate that when a supply is reduced the value of the item that has been reduced will ...
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Why does an economic slowdown lead to deflation?

Usually economists say that in recession there is deflation, so increasing the money supply does not lead to a high level of inflation. According to the Quantity theory of money, the price level is ...
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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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In today's money, what was the value of a 1492 Spanish maravedí?

Satava (2007) estimates that the costs of Columbus's 1492 voyage was 1,765,734 maravedís. In today's money, what was the value of a 1492 Spanish maravedí?
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What is money really?

Say I have €1000 (or $1000) on a bank account. What is that money really? Is it a value stored on some computer at the bank where I have the bank account, a value stored at the central bank of the ...
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Why has M1 shoot up?

M1 has increased massively during the current pandemic. Below is an image from Fred St. Louis. Similar picture emerges from other countries. According to Fed data, the increase is due to a rapid ...
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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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Why not create money to assist the post-COVID-19 economy?

In an imaginary country, a horrible computer virus infected some banks. Within a week, it caused the wealth of a large portion of the population (say, 50%) to drop significantly. For some, it cut 80% ...
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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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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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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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Why can't someone have their money restored if someone they paid in advance goes bankrupt?

A friend paid a travel company €3000 for a holiday in Australia. However the travel company went bankrupt so now her €3000 is lost. She has been informed by the liquidator that the company had such ...
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Value of money (incomes) question - what is the “r” here?

I would like some help with a fairly basic "value of money" question. (I'm very much a beginner in this field so please bear with me.) I'm writing about income changes throughout a decade (2010-2019)....
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Creation and distribution of money from scratch in a country (USA as example)

Suppose in an alternate history, 21st century USA operated on the barter system... no system of money is used. It has all the technology of the 21st century (computers etc). Just no money. The ...
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Money demand in QTM

What is the different between Classical,Long Run and Short run quantity theory of money(QTM)? I have read that the transaction demand for money(Mt)is defined as kPY, where k=1/velocity of circulation....
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Does the income from a product or art count as passive income?

When a writer publishes his book, can we classify the income from the book as passive? Or another example, when a musician publishes his album, does the album generates passive income, making any form ...
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If a fluctuating cryptocurrency becomes the new world coin, would it stop fluctuating?

An often mentioned criterium for money is that it should be a unit of account. It could be argued that cryptocurrencies don't satisfy this requirement. The argument is that businesses like bakers ...
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Why is the marginal utility of money assumed to be constant in Marshallian Theory of Consumer Behaviour

While studying the Marshallian Theory of Consumer Behaviour, I came across the assumption that the marginal utility of money is assumed to be constant. Can someone please explain why is this so?
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What did Jevons mean by this quote?

Jevons (1875): Currency is to the science of economy what the squaring of the circle is to geometry, or perpetual motion to mechanics. I can't make any sense of this quote. I know that the "...
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1answer
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The government does not need to gather capital via tax and Treasuries to spend? According to MMT

I have watched Warren Moslers interview. https://www.youtube.com/watch?v=W97s3zbFKvc&t=841s. At 7:26 he says that the Treasury does not issue securities for the purpose of financing spending (it ...
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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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What happens if you cannot lend more than what you have?

This is hypothetical but what would happen if you cannot lend more money than you have? Say you have £100, the maximum you can lend is £100. But somehow you lend £200 to Joe, and Joe spends all of it ...
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Bank of Canada operating band

I read the following quote about the Bank of Canada's "operating band" for inducing target overnight loan rates: ...
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Is there some background/explanation why the Fed discontinued publishing their M3 indicator, circa 2006?

As Wikipedia says and as it can be easily verified, since 2006, the Fed no longer publishes an M3 indicator (unlike the ECB which still hangs on to that notion). So is there some background or ...
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Is there a clear timeline of ECB/Eurosystem's changes to the defintion of M3 (with regard to repos)?

I found that circa 2012 the ECB/Eurosystem changed their definition of M3 to exclude at least some repos, which previously were included. According to a 2014 Bundesbank publication, the change ...
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Creation of Money - Hypothetical Situation

Imagine you sell me some consulting services. I don't have any cash, so I give you a $100 IOU instead. You now have a $100 Note Receivable on your Balance Sheet. ...
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108 views

Convention / standard methodology for calculating real prices?

Is there an established professional standard used by economic / financial institutions for including or excluding i) the starting year/period, and ii) the end year/period when calculating real prices ...
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Do reserves at Bank of Canada count as money?

I read the following three statements concerning M1 and M2 in Canada: a) "M1 consists of currency held outside the banks and chequable deposits of individuals and businesses." b) "M1 does not ...
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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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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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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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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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What happens to Interest rate if the money supply is fixed?

With the increase in Money supply, the nominal interest rate tends to increase. But what happens if the supply of money is fixed? What happens to the Interest Rate?
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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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Monetary Theory Money Model Help

the following is a monetary theory overlapping generations model question and I wonder whether I have the correct answer. Can someone please let me know? Thanks! Question: Suppose there is a fixed ...
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Is money capital?

The Oxford English Dictionary defines "capital" as n. economic goods (e.g. railways, ships, machinery, buildings) destined for use in production (as opposed to consumers' goods). Historically, the ...
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Help finding historical data for velocity of money (M1 or M2) for any country except USA

Can anyone point me to a data set of money velocity for at least 20 years back for any other country than the US?
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demand for money

I am currently studying the demand for money by Blanchard. this model assumes that the amount of money held is basically related to transaction levels and the the attractiveness of bonds. i.e.: ...
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How does a bank create new money when it pays its own staff?

I am reading Ryan-Collins et al. (2013, Where Does Money Come From? A Guide to the UK Monetary and Banking System). I think I understand how banks create new money whenever they make a loan. Using ...
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I'm looking for a reviewed source on the amount of money in the world

As in title, I'm looking for a paper estimating the amount of all money in the world, sum of value of all national currencies or something like this. When I google it, I find only pop-science ...
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Can inflation occur in a positive-sum game currency system such as the Stack Exchange reputation system?

As most active users of this site know, the way the reputation system works is that everyone starts out with 1 reputation and a user can earn more reputation by asking good questions and writing ...
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How does the pie get larger?

I understand the concept of creation of wealth through trade, innovation, labor and capital. New value is being added to the economy. Let's imagine for a second that there are no central banks and the ...
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Interest rate - Price of Credit vs Price of Money

I read somewhere that interest rate as the price of money is wrong but rather it is the price of credit. Can someone elaborate and explain what this means?
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Is money mostly created (out of nothing) by banks making loans?

In the Bank of England's Quarterly Bulletin, 2014 Q1, McLeay, Radia, & Thomas write a pair of articles titled: "Money in the modern economy: an introduction" and "Money creation in ...
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Why is the cash in circulation on the rise in rich countries?

The amount of cash in circulation is on the rise in rich countries (US, EU, etc; except the cashless economy, Sweden). In the digital era, isn't this phenomenon contradictional? For example, here's ...
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Effect of money supply on price level

Consider a macroeconomy defined by following equations: $$M = kPy + L(r)$$ $$S(r) = I(r)$$ $$y = m $$ Where $M$ is money supply, $P$ is price level, $y$ is output, $r$ is interest rate, while $k,m$ ...
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What happens if a country omits the zeros of it's current money?

I mean, for example, the government changes all x10000 to x1; where x equals to currency of the respected country (Dollar, for instance).
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Wouldn't abolition of cash give rise to a substitute currency?

Some countries (e.g. Sweden and Denmark) plan to abolish physical cash in the future and restrict the use of cash to electronical deposits. One of the reasons for this is to prevent hoarding / boost ...
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Did the robbers from Money Heist real steal noone's money?

Money Heist (original Spanish title: La Casa de papel) is a Spanish TV show about a bank heist. From Wikipedia (bolding mine), In Money Heist, a mysterious man, known as "The Professor", is ...