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The control of the money supply is achieved through?
The control of money supply can be achieved with two main concepts. One is to lower interest rates and the other is to control spending.
If there is high inflation the federal reserve will want to increase the money supply?
One of the two (according to the Keynesian) reason that can create high inflation is attributed to the increased money supply where "too much money chasing too few goods" Therefore, to reduce inflation, the Federal reserve would want to DECREASE the money supply. However, the increase in money supply can create stimulus demand and depreciate the exchange rate of the US Dollars which are considered (although questionable) beneficial to the US economy.
When will the quantity of money available increases?
for money to be in the Market, there must be money equilibrium. i.e quantity of money supplied must be equal to quantity of money demanded. in a situation whereby quantity of money supply increases, without a corresponding increase in quantity demanded, there will be inflation in the Economy. inflation can occure in two different perspectives; either by increase in the general price level or increase in money supply without a corresponding increase in money demand.
Define money supply?
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time.[1] There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits (depositors' easily accessed assets on the books of financial institutions).[2][3]Money supply data are recorded and published, usually by the government or the central bank of the country. Public and private sector analysts have long monitored changes in money supply because of its possible effects on the price level, inflation and the business cycle.[4]That relation between money and prices is historically associated with the quantity theory of money. There is strong empirical evidence of a direct relation between long-term price inflation and money-supply growth, at least for rapid increases in the amount of money in the economy. That is, a country such as Zimbabwe which saw rapid increases in its money supply also saw rapid increases in prices (hyperinflation). This is one reason for the reliance on monetary policy as a means of controlling inflation.[5][6]This causal chain is contentious, however: some heterodox economists argue that the money supply is endogenous (determined by the workings of the economy, not by the central bank) and that the sources of inflation must be found in the distributional structure of the economy.[7]In addition to some economists'[who?] seeing the central bank's control over the money supply as feeble, many would also[who?] say that there are two weak links between the growth of the money supply and the inflation rate: first, an increase in the money supply, unless trapped in the financial system as excess reserves, can cause a sustained increase in real production instead of inflation in the aftermath of a recession, when many resources are underutilized. Second, if the velocity of money, i.e., the ratio between nominal GDP and money supply, changes, an increase in the money supply could have either no effect, an exaggerated effect, or an unpredictable effect on the growth of nominal GDP.
What are the determinants of money supply in an economy?
Main determinants of the supply of money are (a) monetary base and (b) the money multiplier. These two broad determinants of money supply are, in turn, influenced by a number of other factors. Various factors influencing the money supply are discussed below:1. Monetary Base:Magnitude of the monetary base (B) is the significant determinant of the size of money supply. Money supply varies directly in relation to the changes in the monetary base.Monetary base refers to the supply of funds available for use either as cash or reserves of the central bank. Monetary base changes due to the policy of the government and is also influenced by the value of money.2. Money Multiplier:Money multiplier (m) has positive influence upon the money supply. An increase in the size of m will increase the money supply and vice versa.3. Reserve Ratio:Reserve ratio (r) is also an important determinant of money supply. The smaller cash-reserve ratio enables greater expansion in the credit by the banks and thus increases the money supply and vice versa.Reserve ratio is often broken down into its two component parts; (a) excess reserve ratio which is the ratio of excess reserves to the total deposits of the bank (re = ER/D); (b) required reserve ratio which is the ratio of required reserves to the total deposits of the bank (rr = RR/D). Thus r = re + rr. The rr ratio is legally fixed by the central bank and the re ratio depends on the market rate of interest.4. Currency Ratio:Currency ratio (c) is a behavioural ratio representing the ratio of currency demand to the demand deposits.The effect of the currency ratio on the money multiplier (m) cannot be clearly recognised because enters both as a numerator and a denominator in the money multiplier expression (1 + c/r(1 +t) + c). But, as long as the r ratio is less than unity, a rise in the c ratio must reduce the multiplier.5. Confidence in Bank Money:General economic conditions affect the confidence of the public in bank money and, thereby, influence the currency ratio (c) and the reserve ratio (r). During recession, confidence in bank money is low and, as a result, c and r ratios rise. Conversely, during prosperity, c and r ratios tend to be low when confidence in banks is high.6. Time-Deposit Ratio:Time-deposit ratio (t), which represents the ratio of time deposits to the demand deposits is a behavioural parameter having negative effect on the money multiplier (m) and thus on the money supply. A rise in t reduces m and thereby the supply of money decreases.7. Value of Money:The value of money (1/P) in terms of other goods and services has positive influence on the monetary base (B) and hence on the money stock.8. Real Income:Real income (Y) has a positive influence on the money multiplier and hence on the money supply. A r se in real income will tend to increase the money multiplier and thus the money supply and vice versa.9. Interest Rate:Interest rate has a positive effect on the money multiplier and hence on the money supply. A rise in the interest rate will reduce the reserve ratio (r), which raises the money multiplier (m) and hence increases the money supply and vice versa.10. Monetary Policy:Monetary policy has positive or negative influence on the money multiplier and hence on the money supply, depending upon whether reserve requirements are lowered or raised. If reserve requirements are raised, the value of reserve ratio (r) will rise reducing the money multiplier and thus the money supply and vice versa.11. Seasonal Factors:Seasonal factors have negative effect on the money multiplier, and hence on the money stock. During holiday periods, the currency ratio (c) will tend to rise, thus, reducing the money multiplier and, thereby, the money supply.
Provide two definitions of the Canadian money supply explain the difference in the two definitions you provide?
The 2 definitions of the Canadian money supply are M1 and M2.
The control of the money supply is achieved through?
The control of money supply can be achieved with two main concepts. One is to lower interest rates and the other is to control spending.
What are the categories of disease?
two categories of diseases
What two categories can sanitary appliances be divided into?
RAM LTM these are the two categories
What are the categories of experiments?
There are two categories of experiments: laboratory and field.
What two categories in chemicals are based on carbon content?
Two categories of chemicals are based on carbon ?
What two issues dominated national politics in the 1870s and 1880s?
The money supply and civil-service reform
How is shopping divided into categories?
The two main categories are convenience goods and shopping goods; two lesser categories are specialty items and unsought goods.
If there is high inflation the federal reserve will want to increase the money supply?
One of the two (according to the Keynesian) reason that can create high inflation is attributed to the increased money supply where "too much money chasing too few goods" Therefore, to reduce inflation, the Federal reserve would want to DECREASE the money supply. However, the increase in money supply can create stimulus demand and depreciate the exchange rate of the US Dollars which are considered (although questionable) beneficial to the US economy.
What is the main difference between these two categories?
You haven't stated any categories.
In blue printing what are the two large categories of drawings?
In blueprinting the two large categories of drawings are plan and elevation view.
What are the two basic categories of transmission?
The two basic categories of transmission are:High voltage transmission andLow voltage transmission.
