Question

Which of the following would NOT increase the supply of money in a fiat money economy?

Answer 1

Answer:

The correct answer is option c.

Explanation:

Fiat money refers to the currency which is not backed by any physical assets such as gold or silver. Its value is derived from its demand and supply rather than through the value of commodity it is backed by.  

Since the currency is not backed by gold, it will not be affected by the discovery of gold. Had it been backed by gold, the money supply would have increased.  

Purchasing treasury securities, decreasing the required reserve ratio, decreasing the discount rate will all increase the reserves with the commercial This will lead to an increase in money supply through increased lending.

Since water is an abundant commodity, linking the value of money to water will increase money supply.

Answer 2

c. There is a discovery of gold.

Because gold is not included in monetary policy.

Further Explanation

Monetary policy is the process of regulating a country's money supply to achieve certain goals; such as curbing inflation, reaching full or more prosperous workers. Monetary policy can involve setting loan interest standards, "margin requirements", capitalization for banks or even acting as the last business borrower or through agreement through negotiations with other governments.

Monetary policy can be classified into two, namely:

Expansive monetary policy (Monetary expansive policy)

It is a policy in order to increase the amount of money in circulation. This policy is carried out to overcome unemployment and increase people's purchasing power (public demand) when the economy experiences a recession or depression. This policy is also called easy monetary policy (easy money policy)

Monetary contractive policy

It is a policy in order to reduce the amount of money in circulation. This policy is carried out when the economy experiences inflation. Also called the tight money policy

Monetary policy can be carried out by implementing monetary policy instruments, which include:

Open Market Operations

Open market operations are a way of controlling money in circulation by selling or buying government securities. If you want to increase the money supply, the government will buy government securities.

Discount Rate

The discount facility is a regulation of the amount of money in circulation by playing the interest rate of a central bank at a commercial bank. To make the amount of money increase, the government reduces the interest rate of the central bank and conversely increases the interest rate in order to make the money in circulation decrease.

Reserve Requirement Ratio

The mandatory reserve ratio is regulating the amount of money in circulation by playing the amount of banking reserve funds that must be deposited with the government. To increase the amount of money, the government lowered the required reserve ratio. To decrease the money supply, the government raised the ratio.

Moral Appeal (Moral Persuasion)

The moral appeal is a monetary policy to regulate the money supply by appealing to economic actors. Examples such as calling on the lenders to be careful in issuing credit to reduce the money supply and to urge banks to borrow more money from the central bank to increase the money supply to the economy.

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Monetary policy brainly.com/question/13741402

money in circulation brainly.com/question/13741402

Details

Class: College

Subject: Business

Keywords: monetary, policy, money