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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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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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 ...
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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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Are there any papers that have tried to model the Modern Money Theory?

This is a reference request for papers that have tried to model MMT.
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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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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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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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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 the modern ...
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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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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 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 ...
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Is there a 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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Quantity theory of money

Suppose the velocity of circulation (V) is constant. Annual growth rate of real GDP is 5%. The money supply grows by 14% per year. Use the quantity theory of money to calculate the inflation rate. My ...
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What is the effect on money multiplier of the following three cases?

Assuming ceterus paribas in each case: (i)The bank expands its operations in the field of financial derivatives. (ii) Increasing competition leads to a fall in the transaction costs incurred by ...
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What would be the effects of an expiration date on currency?

Let's say we introduce a monetary system where each piece of money is printed with an expiration date - a year, perhaps. I'm imagining something rather different from inflation (although I do not ...
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Gapminder's Dollar Street and the role of self-supply

I find it quite hard to get a clear picture of what the income numbers in Gapminder's Dollar Street tell. How to compare \$27 in Burundi with \$10,098 in China? What would it mean that the family in ...
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How Do I Numerically Represent Liquidity in the General Monetary Model Md = L(i) x PY

Please help me it's driving me mad yet I know it's so simple. I understand the qualitative aspects - how liquidity is simply a portion of our nominal income that we demand for transactions. And how ...
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What would be the costs of declaring/legislating that Scottish banknotes be legal tender?

Bank of England: English banknotes aren’t legal tender in Scotland. Scottish notes aren’t legal tender in England or Scotland. Committee of Scottish Bankers: Scottish Bank notes are not Legal ...
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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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Would taxing money owned (as a share of purchasing power) be a better form of taxation?

Consider a nation whose money is entirely digital (like Bitcoin), but centralized (unlike Bitcoin). Furthermore, the total money supply is fixed, i.e. money cannot be created nor destroyed. To be ...
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Is it reasonable to consider government bonds as money

Some measures of the money supply include governments bonds... but I wonder to what degree governments bonds can be considered money. IMHO the degree to which X can be thought of as money equals the ...
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What were the effects of the 2016 Indian banknote demonetisation?

On 2016-11-08, the Government of India announced that it had: decided to cancel the legal tender character of the High Denomination bank notes of Rs.500 and Rs.1000 denominations issued by RBI till ...
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What is the impact of money “sent” to another country?

I've been thinking about this a lot and I am not sure I have understood correctly. I was thinking about, for example, migrant workers who send a portion of their income back home, or wealthy ...
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Who looses Forex if someone gains?

My understanding of forex exchange is that when there are two currencies cur1 and cur2, they are balanced in the world with a ...
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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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difference between demand for money and credit

As far as I understand in both cases we are seeking money that we don't have and would like to borrow. That being said what I find even more misleading is the fact that as a nominal interest rate ...
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Does Bad Money Drive Good Money Out Of Circulation

I have heard the saying, "Bad money drives good money out of circulation," (Gresham's Law) many times. I'm wondering if it's true, what it really means. What's good money? What's bad money? And if ...
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Why is Money Necessary?

I've heard a lot of different economists bullet point a few main ideas as to why money is necessary. However, I'd like to get an ultimate rundown list. What are the major reasons why money is ...
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M1 Money supply data?

Why do these M1 Money supply charts show data only up to 7th May, when the Fed data is released weekly? https://fred.stlouisfed.org/series/M1 http://schrts.co/zgaAPi Thanks
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Is it possible to imagine humanity without a modern understanding of money? [closed]

Of course we can't just take money from current world order and give nothing back. In theory, can an advanced civilization exist without money at all? May be this is an utopic idea because of... what?...
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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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Why don't we mint more m0 instead of creating m1 through fractional reserve banking?

From what I understand, m1 money is just as liquid as m0 since an individual can withdraw it from the bank at any time and in any quantity (up to the amount (s)he deposited). Because of this I don't ...
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Why hyper-inflation?

I understand the $MV=PQ$ identity. I also understand the benefit for the government in some cases to having non increasing over time (even if high) values of $\Delta P$ (stealth tax & seigneur-age ...
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What is a dollar, currently?

What is the definition of a dollar now without gold backing? It seems that a dollar is now just an entry in a book somewhere in some bank. Or it is the federal reserve note? Or is it both? I ...
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What would happen if corporations can only make a maximum profit of 10% per product

I have learned in accounting that companies can add any amount of profit on their products as they want. That can be 10 - over 500 %. I also think that international corporations like Coca Cola, ...
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Why government cannot print money to pay its debt

I have written down an explanation to one of the famous questions "why can't government print money to pay its debt"? after researching for some time on google, I need opinions as to whether this is ...
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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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How Africans use their wages?

I was researching poverty in Africa and was reading about their daily wages. Based on the article linked, 2/3 of Africans live on less than $1.25 USD, a day. However, what this article and many ...
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Is the utility of money *actually* logarithmic?

Apologies for asking what is probably a basic question from someone that is not in the economics field. But I was playing around with the idea of determining how a group of people could split a bill ...
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Why do many economists believe that money is neutral in the long run?

If a central bank carried out monetary policy that consisted of multiplying each person's wealth by a common factor, I would find it plausible that all prices would get multiplied by the same factor ...
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Hyman Minsky's view on Bank Examination

In Stabilizing an Unstable Economy (1986), Hyman Minsky argues that "bank examination is largely perfunctory... rather than an inquiry into the economic viability and the exposures to risk of banking ...
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Do conceptual ideas that become standardised ever make money?

TL;DR - Do standardised concepts ever make money? Recently I have been wondering if conceptual ideas ever make money, more specifically whether a conceptual idea that is standardised ever makes money?...