Money Write For Us – Submit and Contribute Post

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Introduction

Money Write For Us – Money is a medium of exchange; it enables people and businesses to get what they need to live and prosper. Bartering was a way of exchanging goods for other goods before money was created. Money has value, like gold and other precious metals, because it represents something valuable to most people.

How is Money Measured?

But how much money is there, and in what form? Economists and investors ask this problem to determine if there is inflation or deflation. Capital is divided into three categories to make it easier to recognize for measurement purposes:

This money category includes all physical denominations of coins and currencies; sight deposits, which are current and NOW accounts; and traveler’s checks. This money category is the most restricted of the three and is essentially money used to buy things and make payments (see Active Money section below).
This category uses broader criteria to add all money into all-time deposits, savings account deposits, and non-institutional money market funds. This category represents money that can be easily converted into cash.
The broadest money class combines all funds found in the definition and adds to it all long-term deposits, institutional money market funds, short-term repurchase agreements, and other larger liquid assets.

By adding these three categories, we get a country’s money supply or the total amount within an economy.

How Money is Created

We have debated why and how money, a representation of apparent value, is created in the economy. Still, another important factor related to money and the budget is how a country’s central bank (the central bank in the country United States is the Federal Reserve or Fed) can influence and manipulate the money supply.

Of course, if the Fed wants to increase the money supply, perhaps to stimulate economic activity, the central bank can print it. However, physical banknotes make up only a small part of the money supply.

Another way the central bank can increase the money supply is to buy fixed-rate government bonds in the market. When the central bank buys these govt securities, it puts money on the market, effectively in the hands of the public. How does a central bank like the Fed pay for that? Oddly enough, the central bank creates the money and transfers it to those who sell the securities.

Alternatively, the Federal Reserve can lower interest rates, allowing banks to make low-cost loans or credit, a phenomenon known as cheap money, and encouraging businesses and individuals to borrow & spend.