write the determinants of money supply
Answer (1)
17th Aug, 2022
Hello
Money supply is composed of currency held by the public (CP) and demand deposits of the public with the banks (D).
M = C P + D
M = Total money supply with the public
C P = Currency with the public
D = Demand deposits of the public with the banks
The two important determinants of the money supply are
(a) the amounts of high powered money which is also called Reserve Money by the RBI and
(b) the size of the money multiplier.
Other Determinants of money supply are
- The Required Reserve Ratio
- The Level of Bank Reserves
- Public’s Desire to Hold Currency and Deposits
- Other Factors:- The money supply is a function not only of the high-powered money determined by the monetary authorities, but of interest rates, income and other factors.
Hope this information helps you
All the best
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