Supply Of Money

Question 1

Monetary base

Answer 1

Notes and coins outside the central bank

Question 2

Broad money

Answer 2

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)

Question 3

Credit creation

Answer 3

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

Question 4

Narrow money

Answer 4

Notes and coins plus central bank reserves (M0)

Short term deposits In Banking system in circulation

More liquid

Question 5

MZM

Answer 5

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

Question 6

M2

Answer 6

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

Question 7

Non bank private sector

Answer 7

Households and non bank firms

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

Question 8

Bank deposits multiplier

Answer 8

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

E.g. 1:L

Question 9

Money multiplier

Answer 9

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

Question 10

Public escort cash net requirement

PSNCR

Answer 10

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

Question 11

Exogenous and endogenous money supply

Answer 11

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