Podcast
Questions and Answers
Which of the following is NOT true about the money supply?
Which of the following is NOT true about the money supply?
- Reducing the money supply always leads to positive results. (correct)
- A large increase in the money supply can lead to a significant increase in prices.
- The Central Bank determines the money supply.
- An increase in the money supply can lead to stimulating purchasing power.
What is the main tool used by the monetary authority for directing monetary policy?
What is the main tool used by the monetary authority for directing monetary policy?
- Foreign exchange reserves
- Interest rates
- Money supply (correct)
- Stock market
What determines the varying degrees of liquidity of financial assets included in the money supply?
What determines the varying degrees of liquidity of financial assets included in the money supply?
- Their maturity period
- How easily they can be converted into cash (correct)
- Their face value
- Their investment potential
Which of the following is true about the measures of money supply?
Which of the following is true about the measures of money supply?
In the United States, how many main measures of money does the Federal Reserve provide?
In the United States, how many main measures of money does the Federal Reserve provide?
Which central bank provides four measures of money supply as mentioned?
Which central bank provides four measures of money supply as mentioned?
What is the primary function of M2 as a measure of money supply?
What is the primary function of M2 as a measure of money supply?
What distinguishes time deposits from savings accounts in the banking system?
What distinguishes time deposits from savings accounts in the banking system?
Which component is NOT included in M2 but is part of the Broadest Money Supply (M3)?
Which component is NOT included in M2 but is part of the Broadest Money Supply (M3)?
What is a characteristic of money market funds that makes them attractive to investors?
What is a characteristic of money market funds that makes them attractive to investors?
What penalty might depositors face for withdrawing their time deposits before the due date?
What penalty might depositors face for withdrawing their time deposits before the due date?
How do savings accounts function in many societies compared to current accounts?
How do savings accounts function in many societies compared to current accounts?
What is included in M3 that is different from M2?
What is included in M3 that is different from M2?
Which of the following is considered part of Quasi Money in Egypt's M2?
Which of the following is considered part of Quasi Money in Egypt's M2?
How is the value of money defined?
How is the value of money defined?
What happens to the value of money if the price level doubles?
What happens to the value of money if the price level doubles?
Which component is part of M1 but not part of M2?
Which component is part of M1 but not part of M2?
What forms part of Egypt's M2 but not part of M1?
What forms part of Egypt's M2 but not part of M1?
What assets are included in the Narrowest Money Supply (M1) measure?
What assets are included in the Narrowest Money Supply (M1) measure?
Which of the following is true about demand deposits?
Which of the following is true about demand deposits?
What represents a highly liquid financial asset based on the text?
What represents a highly liquid financial asset based on the text?
In which countries do banknotes usually occupy the first place in relative importance?
In which countries do banknotes usually occupy the first place in relative importance?
What is the equation used to calculate the money supply according to the Narrowest Money Supply (M1) measure?
What is the equation used to calculate the money supply according to the Narrowest Money Supply (M1) measure?
Which type of deposit does not pay any interest according to the text?
Which type of deposit does not pay any interest according to the text?
What is the impact of a decrease in prices on the real incomes of employees and retirees?
What is the impact of a decrease in prices on the real incomes of employees and retirees?
How do businessmen with variable incomes typically react to higher prices?
How do businessmen with variable incomes typically react to higher prices?
What happens to the economic position of creditors when the value of money decreases due to rising prices?
What happens to the economic position of creditors when the value of money decreases due to rising prices?
How does inflation impact savers with financial assets like long-term deposits in banks?
How does inflation impact savers with financial assets like long-term deposits in banks?
Why do domestic goods become less competitive in foreign markets when their prices rise?
Why do domestic goods become less competitive in foreign markets when their prices rise?
How does a rise in prices affect the relationship between debtors and creditors?
How does a rise in prices affect the relationship between debtors and creditors?
Study Notes
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Travelers' checks were replaced by prepaid credit and debit cards in the late 1980s.
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M2 is a measure of money supply that includes savings deposits, time deposits, and money market mutual funds in addition to the components of M1.
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Savings accounts are now used similarly to current accounts in many societies.
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Time deposits are accounts where depositors commit to leaving money in the bank for a specific period in exchange for a higher interest rate.
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Money market funds invest in short-term debt securities with minimal credit risk, providing high liquidity with low risk to investors.
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M3 is the broadest measure of money supply, including assets like large time deposits, savings in non-bank financial institutions, and government deposits.
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Egypt has two measures of Money Supply: M1 includes currency in circulation and demand deposits, while M2 includes M1 and Quasi Money.
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The value of money is the purchasing power of currency, with an inverse correlation between the value of money and the level of prices.
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Money supply is a key tool for the central bank in directing monetary policy, affecting purchasing power, investment rates, and prices.
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Measures of money supply vary in liquidity, with M1 being the narrowest measure based on assets used as a medium of exchange.
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M1 includes banknotes, deposit money, and traveler's checks, with demand deposits being highly liquid financial assets.
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Changes in the value of money impact income distribution, creditors, debtors, and savers of financial assets.
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Changes in the value of money also affect exchange rates and balance of payments, with rising domestic prices decreasing competitiveness in foreign markets.
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Description
Learn about how the money supply impacts the economy and price levels in Money & Banking Chapter 2. Understand the role of the Central Bank in controlling the money supply and its effects on investment rates and inflation.
