Money supply

supply of moneyM2M1supplyM3monetary aggregatesmonetary aggregatemoneymoney in circulation(M1)
The money supply (or money stock) is the total value of money available in an economy at a point of time.wikipedia
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Central bank

central bankscentral bankingcentral banking system
Money supply data is recorded and published, usually by the government or the central bank of the country.
A central bank, reserve bank, or monetary authority is an institution that manages the currency, money supply, and interest rates of a state or formal monetary union,


inflation rateprice inflationfood inflation
Public and private sector analysts monitor changes in the money supply because of the belief that such changes affect the price level of securities, inflation, the exchange rates and the business cycle.
Economists generally believe that very high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

Quantity theory of money

quantity theoryMonetary theoryquantified
The relationship between money and prices has historically been associated with the quantity theory of money.
In monetary economics, the quantity theory of money (QTM) states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply.


hyper-inflationinflationgalloping inflation
For example, a country such as Zimbabwe which saw extremely rapid increases in its money supply also saw extremely rapid increases in prices (hyperinflation).
Unlike low inflation, where the process of rising prices is protracted and not generally noticeable except by studying past market prices, hyperinflation sees a rapid and continuing increase in nominal prices, the nominal cost of goods, and in the supply of money.

Monetary policy

monetarymonetary policiesexpansionary monetary policy
This is one reason for the reliance on monetary policy as a means of controlling inflation.
Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.

Endogenous money

endogeneous moneyendogenousendogenous money theory
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.
Endogenous money is an economy’s supply of money that is determined endogenously—that is, as a result of the interactions of other economic variables, rather than exogenously (autonomously) by an external authority such as a central bank.

Velocity of money

velocitymoney velocityIncome velocity of money
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.
The velocity of money (or the velocity of circulation of money") is a measure of the number of times that the average unit of currency is used to purchase goods and services within a given time period. The concept relates the size of economic activity to a given money supply and the speed of money exchange is one of the variables that determine inflation. The measure of the velocity of money is usually the ratio of gross national product (GNP) to a country's money supply.

Federal Reserve

Federal Reserve SystemUS Federal ReserveU.S. Federal Reserve
For this purpose, cash on hand and balances in Federal Reserve ("Fed") accounts are interchangeable (both are obligations of the Fed).

Fractional-reserve banking

fractional reserve bankingCriticism of fractional-reserve bankingfractional reserve system
Commercial banks play a role in the process of money creation, especially under the fractional-reserve banking system used throughout the world.
Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank.

Reserve requirement

reserve requirementsreserve ratiocash reserve ratio
After putting aside a part of these deposits as mandated bank reserves, the balance is available for the making of further loans by the bank.
The total amount of all NTAs held by customers with U.S. depository institutions, plus the U.S. paper currency and coin currency held by the nonbank public, is called M1.


Money is used as a medium of exchange, a unit of account, and as a ready store of value.
The money supply of a country consists of currency (banknotes and coins) and, depending on the particular definition used, one or more types of bank money (the balances held in checking accounts, savings accounts, and other types of bank accounts).

Liquidity trap

liquidity-trapslack in the economy
This zero bound problem has been called the liquidity trap or "pushing on a string" (the pusher being the central bank and the string being the real economy).
According to mainstream theory, among the characteristics of a liquidity trap are interest rates that are close to zero and changes in the money supply that fail to translate into changes in the price level.

Broad money

broader measures
Narrow measures include those more directly affected and controlled by monetary policy, whereas broader measures are less closely related to monetary-policy actions.
In economics, broad money is a measure of the amount of money, or money supply, in a national economy including both highly liquid "narrow money" and less liquid forms.

Government bond

government bondsbondssovereign bond
They can increase the money supply by purchasing government securities, such as government bonds or treasury bills.
If a central bank purchases a government security, such as a bond or treasury bill, it increases the money supply because a Central Bank injects liquidity (cash) into the economy.

Monetary base

base moneycentral bank moneyhigh-powered money
Narrow measures include those more directly affected and controlled by monetary policy, whereas broader measures are less closely related to monetary-policy actions.
The monetary base should not be confused with the money supply, which consists of the total currency circulating in the public plus certain types of non-bank deposits with commercial banks.

Federal Reserve Note

Federal Reserve Notesbanknoteslarge-sized note
This monetized debt can increase the money supply, either with the issuance of new Federal Reserve Notes or with the creation of debt money (deposits).

Demand deposit

bank moneydemand depositsscriptural money
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).
These account balances are usually considered money and form the greater part of the narrowly defined money supply of a country.

Reserve Bank of India

RBIcentral bankRBI Belapur
The Reserve Bank of India (RBI) is India's central bank, which controls the issue and supply of the Indian rupee.

Keynesian economics

KeynesianKeynesianismKeynesian theory
Keynesian economists point to the ineffectiveness of open market operations in 2008 in the United States, when short-term interest rates went as low as they could go in nominal terms, so that no more monetary stimulus could occur.
Keynes viewed the money supply as one of the main determinants of the state of the real economy.

Reserve Bank of Australia

Reserve BankChairman of the Reserve Bank of AustraliaRBA
A movement toward reestablishing the gold standard occurred after World War I, with John Garvan leading various boards in contracting the money supply on the route to doing so, and the gold standard was instituted for both the British pound sterling and the Australian pound in 1925.

Money multiplier

M1 Money MultiplierM2 multipliermonetary multiplier
The ratio of a pair of these measures, most often M2 / M0, is called an (actual, empirical) money multiplier.
Most simply, it can be defined either as the statistic of "commercial bank money"/"central bank money", based on the actual observed quantities of various empirical measures of money supply, such as M2 (broad money) over M0 (base money), or it can be the theoretical "maximum commercial bank money/central bank money" ratio, defined as the reciprocal of the reserve ratio, 1/RR.

Bank of Japan

BOJCentral BankJapan
The institution was given a monopoly on controlling the money supply in 1884, but it would be another 20 years before the previously issued notes were retired.


monetaristmonetaristsmonetarist school
Unlike the other terms, the velocity of money has no independent measure and can only be estimated by dividing PQ by M. Some adherents of the quantity theory of money assume that the velocity of money is stable and predictable, being determined mostly by financial institutions.
Monetarism is a school of thought in monetary economics that emphasizes the role of governments in controlling the amount of money in circulation.

Milton Friedman

FriedmanFriedman, MiltonMilton
Economists such as Milton Friedman believed that the central bank would always get it wrong, leading to wider swings in the economy than if it were just left alone.
Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy.

Near money

Quasi moneyquasi-money
Near money is not included in narrowly defined versions of the money supply, but broader versions include some types of near money.