Determinants of the money supply, Managerial Economics

Determinants of the money supply

Two extreme situations are imaginable.  In the first situation, the money supply can be determined at exactly the amount decided on by the Central Bank. In such a case, economists say that the money supply is exogenous and speak of an exogenous money supply.

In the other extreme situation, the money supply is completely determined by things that are happening in the economy such as the level of business activity and rates of interest and is wholly out of the control of the Central Bank.  In such a case economists would say that there was an Endogenous money supply, which means that the size of the money supply is not imposed from outside by the decisions of the Central Bank, but is determined by what is happening within the economy.

In practice, the money supply is partly endogenous, because commercial banks are able to change it in response to economic incentives, and partly exogenous, because the Central Bank is able to set limits beyond which the commercial banks are unable to increase the money supply.

Posted Date: 11/29/2012 4:45:31 AM | Location : United States







Related Discussions:- Determinants of the money supply, Assignment Help, Ask Question on Determinants of the money supply, Get Answer, Expert's Help, Determinants of the money supply Discussions

Write discussion on Determinants of the money supply
Your posts are moderated
Related Questions
Ask quesCase Study Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sens

critically analysis the profit maximisation theory of business firm and illucidet the role of profit in business

Factors influencing demand for a product These are broadly divided into factors determining household demand and factors affecting market demand . Factors affecting hou

Q. Illustrate about Pecuniary economies? Pecuniary economies (which is monetary economies) are those economies accrued by the firm from paying lower prices for the factors used

The emergence of managerial economics as a separate course of management studies can be attributed to at least three factors: 1.      Growing complexity of business designs maki

Explain the concept of externality in economics? Give one example of a positive and a  negative externality in Australia.

Can identity economics explain some patterns observed in the Australian economy

State the types of demand elasticity Income Elasticity: Elasticity of demand with respect to change in consumer's income. Price Expectation Elasticity of Demand: Elast

Real Rigidities in the Labour Market   New Keynesian  theories of the labour market help in explaining  the existence of involuntary unemployment. The theories also attempt to

Price Elasticity of Supply Price Elasticity of supply measures the degree of responsiveness of quantity supplied to changes in  price.  The co-efficient of the elasticity of s