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Predict what will happen to the money supply if there is a sharp rise in the currency ratio?
Wiki User
∙ 12y ago
The money supply falls. The rise in c means that there has been a shift from deposits which undergo multiple deposit expansion to currency which does not. Thus overall level of multiple expansion declines, and the money multiplier and money supply fall.
Wiki User
∙ 12y ago
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What percent of US money exists in physical currency?
About 2-3% of the total money supply exists in physical currency.
What is the major component of the money supply M1?
Currency in Circulation
Are there other tools used by the feds to increase money supply?
The Federal Reserve (or Fed) increases the money supply by buying back outstanding U.S. Gov't Securities (bonds and such). By doing so, they are adding more currency into the economy, thus increasing the supply of money, or money supply. Conversely, the Fed can also lower the money supply. To do so, they simply sell U.S. Gov't Securities. This means that they sell bonds out and bring currency in, thus reducing the money supply.
If the fed increases the money supply what will happen to interest rates?
when money supply is increased, interest rates decrease
What happens to the value of money if an ulimated supply of currency is injected into the economy?
it becomes worthless
What percent of US money exists in physical currency?
About 2-3% of the total money supply exists in physical currency.
What is the major component of the money supply M1?
Currency in Circulation
Are there other tools used by the feds to increase money supply?
The Federal Reserve (or Fed) increases the money supply by buying back outstanding U.S. Gov't Securities (bonds and such). By doing so, they are adding more currency into the economy, thus increasing the supply of money, or money supply. Conversely, the Fed can also lower the money supply. To do so, they simply sell U.S. Gov't Securities. This means that they sell bonds out and bring currency in, thus reducing the money supply.
What happens to worn out currency?
There are many things that could happen to worn out currency. Worn out currency can be recycled for new money.
If the fed increases the money supply what will happen to interest rates?
when money supply is increased, interest rates decrease
What happens to the value of money if an ulimated supply of currency is injected into the economy?
it becomes worthless
What Six characteristics of money?
Currency, durability, portability, divisibility, uniformity, limited supply, acceptability.
The idea that prices income and economic stability are primarily a function of growth in the money supply is called?
This is known as money, or currency, stability. Prices, income and economics must be stable and constant in order for the money supply to grow.
What is currency drain?
The effect of people holding part of the increase in the money supply as currency, rather than depositing it so that it can be used to create more loans
What happens when the government increases the money supply?
There several things that happen when the government increases the money supply. This may cause inflation as there will be more money in the market than goods.
Difference between monetary base and money supply?
MB=CU+DEP (Currency +Deposits) MS=CU+DEP+IR (Currency + Deposits+International Reserves)
What is the difference between a fixed currency and a floating currency?
A fixed currency is used in countries where the value of the money is closely tied to the value of gold, or the value of another country's currency. A floating currency is one that changes depending on the state of the market, i. e. supply and demand.
