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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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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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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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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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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Friedman's version of money multiplier formula

In his Quantity Theory of Money article M. Friedman uses the following formula for the money multiplier: $$ M = H \times \frac{\frac{D}{R}(1 + \frac{D}{C})}{\frac{D}{R}+\frac{D}{C}} $$ where $M = $ ...
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Money in New Keynesian models

I have been doing some reading on general equilibrium theory and it has made me highly confused regarding the logic behind NK models. If I have understood correctly, NK models are based on Walrasian ...
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Sources of the endogeneity of money in New Keynesian economics (Woodford)

I am trying to wrap my head around Woodford's "Interest and Prices" so I have a question regarding the source of the endogeneity of the money supply in his models. The Post Keynesian view is that ...
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1answer
76 views

Can the US dollar collapse and what are steps that I should take in the event that this happens?

A friend of mines says that the US dollar is so "heavily intertwined" in other nations that if the US Dollar was to become worthless then that would have a major impact on the world. However with ...
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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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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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23 views

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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37 views

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 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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Effect of risk premium on the money demand (LM curve)

In short, I'm having problems understanding the LM curve, as the explanation given by the picture is for me, the 4th row is counter intuitive. When risk premium increases it causes the interest rates ...
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28 views

Why is money used in transactions when it is dominated as a store of value?

In Lectures on Macroeconomics by O.Blanchard and S.Fisher (1993) stated that (the emphasize is mine): Building a model that formally explains why money is used in transactions when it is ...
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104 views

Effects of variables on the demand for money?

I need verification on my understanding as to whether the following factors affect the demand for money, and if so how they affect it: Changes in Nominal National Income: will affect the transactions ...
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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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56 views

What is the “natural rate of interest” vs. “money interest rate”?

What exactly is the distinction that Knut Wicksell made in his Interest & Prices between "natural rate of interest" or "natural interest" ("der natürliche Kapital zins") and the "money rate of ...
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54 views

A country with dual payment system

Is there any country with dual domestic payment system? For instance, in the USA there are CHIPS or Fedwire both help wire transfer of USD within the USA. They give services to international ...
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4answers
247 views

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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Is there a clear timeline of ECB/Eurosystem's changes to the defintion of M3 (with regard to repos)?

I found that that circa 2012 the ECB/Eurosystem changed their definition of M3 to exclue at least some repos, which previously were included. According to a 2014 Bundesbank publication, the change ...
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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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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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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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1answer
18 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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23 views

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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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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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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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 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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Are things any better in what society considers “third world countries” as they were years ago? If things are better, how did they improve and why?

For years I've seen non-stop commercials of countries in the continent of Africa showing kids who live in sewage huts, parents are dead, war gangs and criminals rule their lives. Like in Captain ...
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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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2answers
126 views

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 ...
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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 ...