Answer to Question #185378 in Macroeconomics for Bharti

Question

What is meant by supply of money how it is determined?

Answer 1

Solution:

The supply of money refers to the stock of money in the economy at any given time. It can also be defined as the total amount of money circulating in the economy. It includes all the currency and liquid assets such as cash, coins, deposits, and savings in bank accounts

The supply of money is determined by both exogenous and endogenous means, which refers to a level of bank reserve, required cash reserve ratio, the need for people to hold currency relative to deposits, level of interest, and high-powered money.