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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3answers
669 views

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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3answers
372 views

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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1answer
45 views

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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3answers
102 views

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?...
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1k views

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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0answers
14 views

What is the easiest and cheapest way to store big money with option to any moment get then in cash? [closed]

Imagine I have a lot of money and my number 1 aim is to store them somewhere where I can get them fast if I need them. I don’t want to have dividends from my money but if I will it would be great. ...
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1answer
26 views

Is there any specific distribution that is recommended for modelling individual income?

I'm a statistician and my colleagues work with income data every now and then, but they usually apply some arbitrary cut-off and go with logistic regression. I know there's an infinite range of ...
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2answers
5k views

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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2answers
169 views

Why does every electronic transaction of USD legally take place on American territory?

In an article of a respected German newspaper (Die Zeit) I found the following statement (translation by me): 90 % of all foreign exchange trades are dealt in USD. Since every electronic ...
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4answers
255 views

Printing money to redistribute wealth

A fictional country has 100 people. The total printed money is $2000. Ten rich people own half of it ($100 each), the remaining ...
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1answer
52 views

What is the actual numerical value of the velocity of money?

All the discussions of the velocity of money that I've come across (e.g. here, here, and here) only display relative changes in the velocity of the money (e.g. by normalizing it by an unspecified ...
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1answer
57 views

Why does changing the value a currency help/hurt exports if sellers can just inflate/deflate prices to match the change?

1) I make widgets and sell them for $10. 2) The government reduces the value of my currency by 10%. 3) The market value of my widgets is the same as before, so I raise my prices to $11 and I can ...
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1answer
46 views

Isn't buying currency with high interest rates a double whammy?

I will give an example of what I mean and please tell me what I'm missing because this can't be correct. For the sake of simplicity I will only use USD and EUR. So let's say that the central bank in ...
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1answer
439 views

The fisher effect

The Fisher effect says that highter inflation rate leads to a higher nominal rate. I found an interesting explanation about the interest rates: Lower interest rates translate to more money available ...
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1answer
27 views

How does hedging using futures work?

I can't understand how it makes sense. From what I've read, corn producers (for example) sell their corn at current price but deliver the corn later, in order to protect themselves from decline in ...
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1answer
38 views

Why is the annual transferred money worldwide quite different?

The source below says "According to this document from the US Treasury, SWIFT handles about \$5 trillion per day, or given about 250 business days per year, about \$1.25 quadrillion dollars a year.". ...
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8k views

Why is bartering uncommon in modern countries?

Recently, I witnessed two acquaintances of mine engaging in bartering, where one traded his services for the services of the other. Both services had about the same value. By trading them directly, ...
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0answers
218 views

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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2answers
127 views

How can all the bitcoin in the world be worth more than McDonald's Corporation?

What makes bitcoin so valuable? It has already surpassed the value of almost all publicly traded companies. I understand it can be used to buy things like digital money but why does the price go up? ...
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3answers
159 views

What is Q in the quantitative theory of money?

I am testing the quantitative theory of money for South Africa. QP = Mv. It is fairly clear what M and P are (broad money, or M1, price index, etc). But I am puzzled with Q. Is it GDP or does it ...
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579 views

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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5answers
134 views

Why do banks charge a spread on credit?

According to the doctrine of the money multiplier (https://en.wikipedia.org/wiki/Money_multiplier), a positive reserve ratio means a bank has LESS loans than deposits. See the table in the link. ...
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2answers
139 views

Is money received from my mother every month an income?

If my mother sends me some money every month, is that considered an income? I usually fill in a sheet to track my expenses and display my savings for every month. For the past few months, I've been ...
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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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31 views

Why Yen grew stronger after North Korea's H-bomb threat? [duplicate]

Financial markets have had only a muted reaction to the dispute in recent months, but on Friday assets regarded as havens for investors jumped immediately after the news of North Korea’s latest H-...
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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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4answers
155 views

What exactly people mean when they say “X is a $Y billion industry”?

I'm reading the "Personal MBA" book right now and it says that "Yoga is $8 billion industry worldwide". What does it mean? And how can one calculate the amount of money in some industry?
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3answers
87 views

How much physical currency does the Fed transfer to banks per year?

I just wonder since money has to enter the system somehow. Currently the Fed will supply whatever banks ask to meet their capital needs. But how much physical currency does the Fed, treasury, and mint ...
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4answers
13k views

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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2answers
636 views

How and when is M0 money created?

The Federal Reserve Coin and Currency Service Website describes their currency order process thus: The 7.2 billion notes included in the FY 2015 order reflect the Board’s estimate of net demand ...
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1answer
6k views

Are prepaid cards, and gift cards considered a form of money?

Are the followings considered a form of money prepaid (debit) cards gift cards (both bank-issued such as American Express gift cards, and store-issued such as Walmart gift cards) ? Are their ...
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1answer
787 views

Exchange rate and domestic money supply

It seems an obvious fact (not explained by authors but stated) that when a Central Bank purchases foreign currency (to stabilise its own), the domestic money supply goes up. It seems to me that the ...
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2answers
491 views

How could Pablo Escobar earn so much money?

I read it's about 30 billion. But I read there were 6 million users in 1985. Let's say he gets 10 percent of the sales price, it means each person paid 50000 dollars for cocaine. It sounds way too ...
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2answers
449 views

Did the idea of “making money” originate in the United States?

I am currently reading Atlas Shrugged by Ayn Rand and I came across an interesting paragraph related to Economics and American History. If you ask me to name the proudest distinction of Americans, ...
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2k views

Why is M0 higher than M1?

In my understanding, M2 includes M1 and M1 include M0. However, I checked the money supply here and used the "Compare" function to compare the money supply of m0 with money supply of m1, and found ...
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1answer
122 views

Forward Guidance - What happens when the FED unloads its balance sheet

Please Excuse my ignorance. The US Federal Reserve has issued forward guidance telling the world that it is going to start to sell its (well a little less) 4.5 trillion dollars worth of securities ...
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3answers
136 views

How can you know which is the “current dollar value” of a dollar value from another decade?

Is there a mathematical ecuation or some method, which allows you to have the "current dollar value" of an amount dollar from other year, let's say, decades ago? For example, it's said that the ...
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0answers
35 views

How much does a person donate to charity unintentionally [closed]

I am wondering if it's possible to estimate what percentage of a person's salary ends up in a charity even if that person never donates? I am not an economists and I am not sure if that is a valid ...
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1answer
74 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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2answers
109 views

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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0answers
102 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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1answer
184 views

Is human psychology really reflected into inflation?

I am a total noob in economics, but I'm trying to understand why do we have inflation. I can see that prices are increasing over time and, by definition, this means inflation. I'm fine with this ...
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2answers
4k views

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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3answers
138 views

Can everyone in an economy profit?

I earn a salary, but, like many American workers, I don't spend all of it -- I stash away some in the bank. This is a good thing, since I can one day retire (stop producing), and still live ...
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1answer
70 views

The Federal Reserve is only issuing cash money?

When the Federal Reserve is issuing money, they are only printing cash money (coins and banknotes)? If not, then what other types of money they are issuing?
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1answer
31 views

How are assets distributed by types of organisations? [closed]

How wealth, assets or capital (measured in terms of revenues, assets, equity, etc.) is distributed among the various types of organizations (e.g. State, public companies, private conpanies, ...
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1answer
362 views

How do you find out how much money is in circulation?

I was watching a video about how money gets its value. They say the answer has to do with how much money is in circulation. But how does one find out how much money there is in circulation as set by ...
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1answer
140 views

Impact of hedge funds on economy

I'm still kind of new to these things and some countries seem to be forbiding sharing more about hedge funds to casual people (at least what I understood from it), but anyway: What is/was the largest ...
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2answers
726 views

How do central banks regulate the money supply to avoid inflation?

It is a tricky problem. Historically, poor control money supply led to inflation. Out of control money supply led to hyperinflation. Central banks seem to do a wonderful job in recent years with ...
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1answer
369 views

What effect would destroying large amounts of physical currency have on government finances

India has recently recalled high denomination notes and asked people to deposit the physical currency in old notes in their bank accounts. People who have unaccounted wealth are resorting to ...