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Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments.

2 votes

Basic question: why do markets grow?

The general answer is no, a closed market with only money circulating within the market, and that money never leaving it or entering it, cannot increase its aggregate price level - provided that the q …
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0 votes

What do banks do with "Repaid Principal"?

Just as when a loan is made, a matching liability deposit is created by the underlying double entry book keeping operations, when a loan is repaid that money is effectively removed from the system. i. …
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6 votes

Unintended consequences from "fixing" the US financial system

1) Would lead to the return of general panic led bank runs, and introduce additional instability to the system. It´s not generally appreciated, that 19th century bank runs were not just a symptom of …
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1 vote

Does Inflation Make Money Eventually Worthless?

No. The price paid for any item in a market based economy is loosely a direct function of the total quantity of money and an inverse function of all the transactions that that quantity of money is us …
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3 votes
Accepted

Are bank reserves part of M1 or only part of M2, and why?

Using the Federal Reserve's definition for M1 (warning, M definitions can vary between countries, so always check the local definition): "M1 is defined as the sum of currency held by the public an …
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1 vote

By what steps and contracts does new money enter the economic system?

A lot of the confusion around this subject is created because of a problem of definition within economics, combined with a long term process that has changed the actual form of money being used in the …
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