Money Creation Process

A Money Creation Process is a creation process that creates money supply.

• See: Money Supply, Central Bank, Financial Asset, Commercial Bank, Demand Deposit, Reserve Requirement, Base Money, Fractional Reserve Banking, Quantitative Easing.

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References

2015

• (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/money_creation Retrieved:2015-3-9.
  • In economics, money creation is the process by which the money supply of a country or a monetary region (such as the Eurozone) is increased. A central bank may introduce new money into the economy (termed "expansionary monetary policy", or "money printing" by detractors) by purchasing financial assets or lending money to financial institutions. Commercial bank lending also creates money under the form of demand deposits. When banks had sizable reserve requirements (freezing an important percentage of their deposits in mandatory reserves at the central bank) it was said that the process multiplied this base money through fractional reserve banking.

     Central banks monitor the amount of money in the economy by measuring monetary aggregates such as M2. The effect of monetary policy on the money supply is indicated by comparing these measurements on various dates. For example, in the United States, money supply measured as M2 grew from $6.407 trillion in January 2005, to $8.319 trillion in January 2009.

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