money supply in india
Macro Economics Assignment
On Money Supply in India
Submitted to Dr. B.Padma Narayan
By Feroz Khan (1226113114) & B. Harish Kumar (1226113118)
Introduction:
The supply of money is a stock at their particular point of time, though it conveys the idea of a flow over time. Money supply is defined as currency with the public and demand deposits with commercial banks. Demand deposits are savings and current accounts of depositors in a commercial bank. They are the liquid form of money because depositors can draw cheques for any amount lying in their accounts and the hank has to make immediate payment on demand. Demand deposits with commercial banks plus currency with the public are together denoted as M1 the money supply. This is regarded as a: narrower, definition of the money supply.
The first definition of money supply may be analytically better because M1 is a sure medium of exchange. But M1 is an inferior store of value because it earns no rate of interest, as is earned by time deposits. Further, the central bank can have control over a narrower area if only demand deposits are included in the money supply.
Determinants of money supply:
There are two theories of the determination of the money supply. According to the firstview, the money supply is determined exogenously by the central bank. The second view holds that the money supply is determined endogenously by changes in the economic activity which affect people's desire to hold currency relative to deposits, the rate of interest, etc.
Thus the determinants of money supply are both exogenous and endogenous
On Money Supply in India
Submitted to Dr. B.Padma Narayan
By Feroz Khan (1226113114) & B. Harish Kumar (1226113118)
Introduction:
The supply of money is a stock at their particular point of time, though it conveys the idea of a flow over time. Money supply is defined as currency with the public and demand deposits with commercial banks. Demand deposits are savings and current accounts of depositors in a commercial bank. They are the liquid form of money because depositors can draw cheques for any amount lying in their accounts and the hank has to make immediate payment on demand. Demand deposits with commercial banks plus currency with the public are together denoted as M1 the money supply. This is regarded as a: narrower, definition of the money supply.
The first definition of money supply may be analytically better because M1 is a sure medium of exchange. But M1 is an inferior store of value because it earns no rate of interest, as is earned by time deposits. Further, the central bank can have control over a narrower area if only demand deposits are included in the money supply.
Determinants of money supply:
There are two theories of the determination of the money supply. According to the firstview, the money supply is determined exogenously by the central bank. The second view holds that the money supply is determined endogenously by changes in the economic activity which affect people's desire to hold currency relative to deposits, the rate of interest, etc.
Thus the determinants of money supply are both exogenous and endogenous