Money supply is the means used to buy 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 funds that are used in circulation;
2) passive - accumulations, account balances, etc. They can potentially go into the first group, and vice versa.
Money supply is a set of funds that 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 in circulation in a particular country or locality. This includes all means of payment.
In countries with a modern, developed economy, the money supply is mainly cashless funds. These include checks, payment orders, settlement documents, etc. Non-cash money supply exists in the form of records on the accounts of branches of central or commercial banks. This type 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 several advantages.
Transporting a large number of bills is an expensive and unsafe business. And non-cash can be transferred in a much simpler way. In addition, banknotes and coins can be faked. And just fakes make up an average of 15 to 25% of the total turnover. Leading financiers predict that in the future, cash will disappear and be replaced by electronic money. It will be both more comfortable and safer. Already, cash is gradually fading into the background. The vast majority of transactions are using bank accounts. Even retail is no longer an exception to this rule.
Cash supply is funds that the state has the right to issue exclusively. However, not every country can afford to print banknotes and stamp coins on its own. Therefore, some states transfer orders for the creation of banknotes to other countries. In addition, every five years, banknotes must be changed.
Money supply is
financial flows that are constantly in motion. The speed of their circulation is influenced 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. Accelerated
circulation of funds provokes an increase in the money supply, which is one of the reasons for the increase in inflation. The expansion of lending also leads to additional emissions. Inflation is constrained by the determination
of reserve requirements and
discount rates, the establishment of a specific economic framework for banks. With the increase in lending, the money supply is growing. And vice versa - when loans come back, emission decreases.
If the money supply is growing, this is not always a negative phenomenon for the economy. For example, constant and moderate emissions, combined with an increase in production volumes, contribute to price stability. The money supply itself is not a decisive factor in the economy.