Day: October 22, 2020

Refers to the minimum rate of interest payable to persons to persuade them to part with money in terms of savings or investment i.e. interest being the payment for the loss of liquidity. It inversely relates the speculative demand for Read More …

Commercial banks “create” credit through a process known as credit creation. Credit creation is definedas a process by which commercial banks advance loans from deposits net of a statutory cash ratio requirement. This involves lending out money (from deposits) at Read More …

The Central Bank Governments need to hold their funds in an account into which they can make deposits and against which they can draw cheques. Such government deposits are usually held by the Central Bank. Commercial banks need a place Read More …

An expansionary monetary policy is to do with an increase in money supply which tends to have the following effects on an economy: Inflationary tendencies – an increase in money supply arising from an expansionary monetary policy such as a Read More …

The Transaction Motive A certain amount of money is needed for everyday requirements, the purchase of food and clothing and other ordinary expenses. How much is necessary to hold for these purposes will depend on 3 factors. A person’s income Read More …

Medium of exchange: Money facilitates the exchange of goods and services in the economy. Workers accept money for their wages because they know that money can be exchanged for all the different things they will need. Use of money as Read More …