Macroeconomics

‭●‬ ‭M1 is a subset of M2, meaning that all components of M1 are also part of M2.‬

‭These‬ ‭measures‬ ‭are‬ ‭important‬ ‭for‬ ‭understanding‬ ‭the‬ ‭overall‬ ‭liquidity‬ ‭and‬ ‭fnancial‬ ‭conditions‬ ‭in‬ ‭an‬ ‭economy,‬‭and‬‭they‬‭are‬‭closely‬‭monitored‬‭by‬‭central‬‭banks‬‭and‬‭policymakers.‬‭Money‬‭supply‬‭affects‬‭the‬ ‭purchasing‬ ‭power‬ ‭of‬ ‭money;‬ ‭therefore,‬ ‭the‬ ‭government‬ ‭has‬ ‭to‬ ‭keep‬ ‭a‬ ‭close‬ ‭eye‬ ‭on‬ ‭inflation‬ ‭and‬ ‭hyperinflation to avoid making money no longer acceptable.‬ ‭As‬ ‭we‬ ‭will‬ ‭see‬ ‭later‬ ‭in‬ ‭this‬ ‭chapter,‬ ‭the‬ ‭government‬ ‭controls‬ ‭an‬ ‭economy's‬ ‭money‬ ‭supply‬ ‭through‬ ‭monetary‬ ‭policies‬ ‭implemented‬ ‭by‬ ‭the‬ ‭Fed.‬‭To‬‭achieve‬‭this,‬‭they‬‭utilize‬‭tools‬‭that‬‭affect‬‭the‬ ‭monetary‬ ‭base‬ ‭,‬ ‭often‬ ‭referred‬ ‭to‬ ‭as‬ ‭M0,‬ ‭MB,‬ ‭or‬ ‭high-powered‬ ‭money‬ ‭.‬ ‭The‬ ‭monetary‬ ‭base‬ ‭comprises‬‭the‬‭total‬ ‭However,‬‭only‬‭a‬‭portion‬‭of‬‭the‬‭monetary‬‭base‬‭is‬‭included‬‭in‬‭the‬‭money‬‭supply,‬‭specifcally‬‭the‬‭currency‬ ‭in circulation.‬ ‭D. Financial Institutions‬ ‭The‬ ‭fnancial‬‭sector‬ ‭is‬‭often‬‭considered‬‭the‬‭backbone‬‭of‬‭a‬‭nation's‬‭economic‬‭infrastructure,‬‭serving‬‭as‬ ‭the‬‭intermediary‬‭between‬‭those‬‭who‬‭have‬‭excess‬‭funds‬‭(savers‬‭and‬‭investors)‬‭and‬‭those‬‭who‬‭need‬ ‭capital‬‭(borrowers‬‭and‬‭businesses)‬ ‭.‬‭It‬‭is‬‭a‬‭crucial‬‭component‬‭of‬‭any‬‭modern‬‭economy,‬‭playing‬‭a‬‭pivotal‬ ‭role‬‭in‬‭facilitating‬‭economic‬‭activities‬‭and‬‭supporting‬‭growth.‬‭It‬‭encompasses‬‭a‬‭wide‬‭range‬‭of‬‭frms‬‭and‬ ‭institutions‬ ‭that‬ ‭provide‬ ‭various‬ ‭fnancial‬ ‭services‬ ‭to‬ ‭both‬ ‭commercial‬ ‭and‬ ‭retail‬ ‭customers.‬ ‭These‬ ‭services‬ ‭include‬ ‭banking,‬ ‭lending,‬ ‭investment,‬ ‭insurance,‬ ‭and‬ ‭real‬‭estate,‬‭among‬‭others.‬‭A‬‭robust‬‭and‬ ‭well-regulated fnancial sector is typically seen as a sign of economic stability and vitality.‬ ‭Central Banks‬ ‭A‬ ‭central bank‬ ‭is an institution that‬ ‭manages a country’s‬‭money supply and monetary policy‬ ‭.‬ ‭The‬ ‭Federal‬ ‭Reserve‬ ‭System‬ ‭,‬ ‭often‬ ‭referred‬ ‭to‬ ‭simply‬‭as‬ ‭the‬‭Fed‬ ‭,‬‭is‬‭the‬‭central‬‭banking‬‭system‬‭of‬‭the‬ ‭United States and one of the most influential fnancial institutions in the world.‬ ‭amount of currency in circulation and bank reserves.‬ ‭M0 or MB = cash and coins in circulation + bank reserves‬

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