Buy custom economics for Ashby chapter 1, 2, and 3
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| Topic: |
Business
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| Number of pages / Number of words: |
7 / 1935 |
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The equation is then, M = CC + CA. M is the money supply, CC is the coins and currency, and CA is the checking account balances. Any activity that increases M is said to create money. M must rise only when more money is available and must fall only when there is less money available. This means that when exchanging one type of money for another it must have no bearing on M because no money is becoming available or unavailable...
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This means that when exchanging one type of money for another it must have no bearing on M because no money is becoming available or unavailable. A deposit into a checking account of $100 in coins and paper currency reduces CC and increase CA, leaving M unchanged. When a withdrawal is made from a checking account it reduces CA but increase CC, again leaving M unchanged...
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