Creating money is an art, and not everyone is adept at it. Only some crack the code of successfully creating money and property while a majority arenâ€™t able to do so. However, money creation is not a topic that is restricted to only the people of a country at an individual level. Thus, on how creating money homework answers solves the dilemma of understanding concepts properly helps students.
Money creating process:
Governments of all countries concentrate on creating wealth for the nation for its prosperity and increase of economy. This process by the government is termed as money creation. Money creation can be seen as a process by which a government increases the nationâ€™s supply of money.
According to a recent report, in the United States of America, 97% of the money is created by the central banks and private institutions through loans and bank deposits while the government does only around 3% of money creation through its fiscal policy and other such measures.
Central banks also create money, though it is a relatively small amount as compared to the total money created, by proving loans to private institutions and purchasing assets that have a financial value.
It is important for economics and commerce students to realize that how an individual creates money is vastly different from how a bank or nation, for that matter, create money. So, while writing their creating money homework answers, it is important for students to keep in mind as to how different money creation can be when it comes to looking at it from a nationâ€™s perspective.
Regulation of money creation
The central bank monitors and effectively regulates the amount of money that is being created in a country. The central bank does so by calculating the monetary aggregates and judges it against the same parameter over a fixed course of time and at regular intervals. Even though the private institutions do create a lot of money, it is dependent on the central bank of the country as only the central bank has the power to fix interest rates and money transaction policies.
The fiscal policies of the government also influence money creation to an extent. However, it is imperative to keep in mind that the central bank is and should be free from the control of the executive. When one is looking to give creating money homework answers, one should be well accustomed with the fiscal policy of the government and rates of interest fixed by the central bank.
How money is created
Money circulation procedure:
A normal bank creates money by providing loans to its customers and charging an interest rate on it. By doing so, it not only receives the money it lent but also some additional money as interest.
Banks also make money by offering deposits like fixed deposits, recurring deposits and other smart investment options like SIP, mutual funds, and bonds wherein customers are encouraged to put in their money or invest over a period of time in expectation of a healthy return over and above the money invested.
The banks then invest this money into other banks, financial institutions and investment houses or services like aviation, infrastructure or real estate in return for additional revenue, thereby both creating money as well as maintaining its smooth circulation.
The method of money creation is an important aspect of creating money and for students looking for creating money homework answers, it important for them to know the ways in which a central bank creates money.
Different types of money creation
In this electronic and past faced day and age, very little money is actually present as money. By this statement what I am trying to put across is that very little money is present in the form of currency that can be touched or felt, that is, hard cash. Majority of the money is present in the form of assets like treasury bills, government bonds or foreign currency.
Creating Money homework answers helping students
Students are often clueless about how to solve their assignments related to money creation. For correctly answering creating money homework answers, one not only needs to be well acquainted with fiscal policy and interest rates of the country but also have an in depth knowledge of CPI and factors affecting it.