Money supply is the blood of the economy

Money supply is a means used to purchase or sell goods or services. They are owned by institutional owners, individuals and countries. The structure of the money supply is as follows:

1) active assets that are used in circulation;

2) passive - accumulations, balances on accounts, etc. They can potentially go to the first group, and vice versa.

Money supply is a collection of funds,which determine the economy of a state. It includes, in particular, deposits, savings certificates, etc. In general, this is all that can be classified as finance that is in circulation in a certain country or area. This can include all means of payment.

In countries with a modern, developed economythe money supply is basically non-cash funds. These can include checks, payment orders, settlement documents, etc. Cashless money exists in the form of entries in the accounts of branches of central or commercial banks. This kind of finance is not a means of payment. However, it can be cashed at any time. This process is guaranteed by certain credit institutions.

In general, non-cash money has a number of advantages.

Transportation of a large number of bills isbusiness is expensive and unsafe. And clearing can be translated in a much simpler way. In addition, bills and coins can be faked. And just fakes are an average of 15 to 25% of the total turnover. Leading financial experts are predicting that in the future the cash disappears, it will replace the electronic money. So it will be both more comfortable and safer. Already, cash is gradually receding into the background. The vast majority of transactions involve the use of bank accounts. Even retailing is no longer an exception to this rule.

Cash money is a means thathas the right to issue only the state. However, not every country can afford to independently print banknotes and stamp coins. Therefore, some states transfer an order for the creation of currency notes to other countries. In addition, every five years, banknotes must be changed.

The money supply is the financial flows thatare constantly in motion. The speed of their treatment is affected by many factors. In particular, the gradual replacement of metal and paper money with credit cards, the use of electronic systems, the introduction of modern technologies in banking, etc. The acceleration of the circulation of funds provokes the growth of the money supply, which is one of the reasons for the increase in inflation. The expansion of the scale of lending also leads to additional emissions. Inflation is constrained by the definition of the norms of mandatory reserves and interest rates, the establishment of certain economic frameworks for banks. With the increase in lending volumes, the money supply is also growing. And vice versa - when loans return, emissions decrease.

If the volume of money supply grows, it is not alwaysa negative phenomenon for the economy. For example, constant and moderate emissions, combined with increased production volumes, contribute to price stability. In itself, the volume of money supply is not a decisive factor in the economy.