Money Bank

How much money who owned a country? Because everywhere people assume that the rate of  price in any country depends on the supply of money, this question is an important question. And at first glance does not seem difficult to answer, because the average person think of money as bank notes and coins in his pocket. Of course the government knows how many coins and banknotes that have been printed? Why is it difficult?

One problem lies in what is technically called the velocity of money circulation (velocity of circulation), which means the number of times each piece of money changes hands. Coin or paper money which changed hands four times, four times the clear 'is more important than coins or paper money that changed hands only once.

More difficult problem arises from the fact that there is money in the form other than banknotes and coins: and other forms are actually much more important. If I went to the local town for bebelanja, I brought $ 50. - In the form of banknotes and coins. How much can I buy?

If you answer "for fifty U.S. dollars" then your friend must have a very bad view of the dignity of my credit. What I need is a checkbook that is based on the current account (ie checks) in the bank. Armed with this, and with little means to prove my identity, I can buy so much stuff. Of course, it would be nice if I have enough money in a checking account to pay my check , although this is not always necessary. With a prudent bank manager, the only limit to the freedom of my shopping is up to the rate at which my check will be rejected by my bank. The presence of credit cards in recent years has made the process much easier.

For this reason, money is usually defined as "coin + cash + bank deposits Kerta active" (this is usually called M1) And there is another hassle. I wish I had said rekekening deposits or savings. It's not so easy to handle like a checking account (the technical term, these savings are more difficult to liquid), so it is not money in the real sense. But I can easily pull my money from the savings, if I wanted it. I was compelled to spend more because they know that my money is still there. So this account is also often considered as part of the money stock (now called M2 or M3). And other forms of property, bonds, insurance policies, all have the characteristics of money and in fact often referred to as near money (assets that can quickly be used as money). Actually the only thing special about paper money and coins as a form of money is that banknotes and coins are legal tender, that is, creditors, by law, required to accept this legal tender if it is given (in the case of a coin, only to a limited number). While they may refuse the check. Therefore, the quantity of money is not an economic problems are simple, but more complicated, because the amount of money in bank deposits has a life of its own. This has a number of ways to increase the quantity, no matter whatever amount of money deposited in the bank at first, to start the account.

So this post may be useful. Hope your day fun!