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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7k views

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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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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554 views

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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472 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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172 views

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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204 views

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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118 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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63 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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478 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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59 views

How much money was distributed during quantative easing?

I am trying to discover how much money was created as a result of quantative easing. I do not want to start a political debate. But, I am genuinely interested in learning how much money was signed ...
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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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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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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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520 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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209 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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16k 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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200 views

Real vs Nominal Value Concept

I am having trouble understanding the meaning of the real value of an economic quantity. The concept is easy to grasp: take a year as a base and adjust for inflation by pricing a commodity with the ...
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464 views

Would a world-wide currency be a good idea? [duplicate]

While every country has it's own political ideals, enforcing laws and rules, in an ever more globalized world, I believe the idea of fragmented economy is limiting big growth opportunities while ...
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44 views

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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71 views

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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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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186 views

Is Iranian rial going to get boosted?

I was reading about the Iran's economy and Iranian rial. I have read the news regarding the lift of sanctions from Ira, which had allowed the purchase of Iranian rial in America. I was having query ...
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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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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 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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241 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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131 views

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
100 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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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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215 views

A bank approves a loan: where does the money come from?

In the naïve picture of the banking system, banks strike a balance between savings invested in them by savers and the loans requested of them by borrowers. The money loaned to borrowers is the same ...
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5answers
151 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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265 views

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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398 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 ...
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109 views

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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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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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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410 views

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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44 views

If a business charges more for a product than the cost to make it, how is our economy not inevitably doomed for debt?

The analogy would be stirring water in a bucket; without adding more water to the bucket, there is no gain... Obviously the various resources to create say an iPod came from different countries... ...
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60 views

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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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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387 views

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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66 views

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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174 views

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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350 views

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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530 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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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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409 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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764 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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What is preventing the United States from printing USD to buy up prized assets from foreign countries given that USD is the world's reserve currency?

USD is accepted all over the world. U.S can easily print USD to buy up the most valuable assets from all over the world. Ethics aside. What is preventing the U.S from doing so? What did I miss out?