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Flashcards in Supply Of Money Deck (11):

Monetary base

Notes and coins outside the central bank


Broad money

Cash in circulation plus retail and wholesale bank and building society deposits

Severities with a maturity of less than five years

Held by the non bank private sector

Certificates of deposit

U.K. (M4)


Credit creation

The ability of a commercial bank to increase the amount of money in circulation by giving out more loans

The unique power of banks to multiply loans,deposits and advances


Narrow money

Notes and coins plus central bank reserves (M0)

Short term deposits In Banking system in circulation

More liquid



Notes and coin plus all aight deposits held by the non bank private sector



Notes and coins plus all retail deposits (including all retail time deposits) held by the non bank private sector


Non bank private sector

Households and non bank firms

Everyone in the country but banks and the government (central and local )


Bank deposits multiplier

The no. Times greater the expansion of bank deposits than the additional liquidity in banks that it causes

E.g. 1:L


Money multiplier

The no. Times greater the expansion of money supply is than the expansion of the monetary base that caused it

Change in total broad money supply / change in monetary base


Public escort cash net requirement


The annual deficit of the public sector, and thus the amount that the public sector must borrow


Exogenous and endogenous money supply

Exogenous - money supply that does not downed on the demand for Money but is set by the authorities

Endogenous- money supply that is determined (at least in part) by the demand for money