Table of Contents
- 1 What are the major determinants of money demand?
- 2 Which of the following is not determinants of money supply?
- 3 What are the determinants and motives of demand of money?
- 4 What are the determinants of money supply in this context discuss the money multiplier?
- 5 What are the determinants of money multiplier Class 12?
- 6 What are the determinant of money supply in Nigeria?
- 7 Which is the most important determinant of money supply?
- 8 How does seasonal factors affect the money supply?
What are the major determinants of money demand?
In summary, the demands for money depends on the price level, the interest rate, and real gross domestic product. These three factors combine to determine the fraction of people’s wealth that they hold as cash and checking for shopping, and the fraction that they hold as interest bearing assets.
What are the approach of determination of money supply?
Charles Goodhart During the last two centuries there have been four main approaches to analysing the determination of the money supply, to wit: (1) Deposits cause Loans, (2) The Monetary Base Multiplier, (3) The Credit Counterparts Approach and (4) Loans cause Deposits.
Which of the following is not determinants of money supply?
Income is not a determinant of supply.
What determines money multiplier?
The money multiplier tells us by how many times a loan will be “multiplied” as it is spent in the economy and then re-deposited in other banks. The money multiplier is then multiplied by the change in excess reserves to determine the total amount of M1 money supply created in the banking system.
What are the determinants and motives of demand of money?
The demand for money depends on three main factors: national income, the price level and the rate of interest. Transactions demand and precautionary demand vary directly with the first two factors but speculative demand for money vary inversely with the market rate of interest.
What are the factors influencing money supply?
The nonbehavioral factors considered are (1) changes in net foreign assets (Δ F), (2) changes in credit to the government (Δ DG), and (3) policy-induced changes in monetary liabilities (Δ Lp) of the Central Bank.
What are the determinants of money supply in this context discuss the money multiplier?
In other words, the money supply is determined by the high powered money (H) and the money multiplier (M). The size of money multiplier is determined by the currency ratio (Cr) of the public, the required reserve ratio(RRr) of the central bank and the excess reserve ratio(ERr) of commercial banks.
What factors affect money supply?
What are the determinants of money multiplier Class 12?
It is determined as the ratio of the total money supply by the stock of high powered money in the economy. Since, M/H = (1+cdr)/(cdr+rdr) > 1. Hence, the current deposit ratio (cdr) and reserve deposit ratio (rdr) play an important role in the determination of money multiplier.
What is the formula of money?
Money is either currency held by the public or bank deposits: M =C+D. The monetary base is either held by the public as currency or held by the banks as reserves: B =C+R. For example, a one-dollar withdrawal from the bank causes C to rise by one and R to fall by one, so the sum is unchanged.
What are the determinant of money supply in Nigeria?
The study found that financial liberalization is an important factor in determining money supply in Nigeria, in addition to currency ratio, required reserve ratio and high-powered money.
What is money multiplier determinants Class 12?
Solution: Money multiplier is the number by which total deposits can increase due to a given change in deposits. It is inversely related to legal reserve ratio. Ques 5 Distinguish between ‘Qualitative and Quantitative tools’ of credit control as may be used by a Central Bank.
Which is the most important determinant of money supply?
Determinants of Money Supply: 1 1. The Required Reserve Ratio: The required reserve ratio (or the minimum cash reserve ratio or the reserve deposit ratio) is an important determinant 2 2. The Level of Bank Reserves: 3 3. Public’s Desire to Hold Currency and Deposits: 4 4. Other Factors:
How does the supply of money affect the monetary base?
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.
How does seasonal factors affect the money supply?
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.
How is the size of the money multiplier determined?
The size of the money multiplier is determined by the currency ratio (Cr) of the public, the required reserve ratio (RRr) at the central bank, and the excess reserve ratio (ERr) of commercial banks. The lower these ratios are, the larger the money multiplier is.