Lesson summary: Supply and its determinants. This raises the prospect of higher inflation in the future. Next lesson. The factors that affect money supply are the required reserves for bank rates. From "A Beginner's Guide to Exchange Rates and the Foreign Exchange Market" we saw that the following factors can cause the demand for a currency to rise: Factors Trend Reason Change in supply curve. However, if the supply of money is not carefully controlled, it can hamper economic growth. The effects of the changes in macroeconomic factors (including the money supply) on the development of stock prices were discussed also by Shaoping (2008), who confirmed a vary strong effect of the money supply on the development of … In such a case, the supply of his product would be 50kgs at Rs. Poverty – when people have less money, they cannot afford food and they become unable to work. Table 2: Factors affecting supply of houses S no. Six factors that can shift demand curves are summarized in Figure 9, below. The study shall provide a detail analysis of macro-economic factors ,money supply and the impact of macro-economic factors on money supply in Nigeria. Market equilibrium and changes in equilibrium. Practice: Supply and the law of supply. The AD–AS or aggregate demand–aggregate supply model is a macroeconomic model that explains price level and output through the relationship of aggregate demand and aggregate supply.. Determinants Of Supply. Notice that a change in the price of the good or service itself is not listed among the factors that can shift a demand curve. In the demand–supply model, these factors are divided into two areas based on how they affect exchange rates. This is the currently selected item. The direction of the arrows indicates whether the demand curve shifts represent an increase in demand or a decrease in demand. Therefore, if money supply is severely restricted it is likely to affect the GDP: i.e. If the supply of money in the economy is less than its requirements, then the velocity of money will increase and if the money [supply is less than its requirement, the velocity of money will fall. Start studying Factors Affecting Legal Reserves and the Money Supply (the Fed notes). There are various factors other than price that change the Supply of a product or service and hence cause a shift in its Supply Curve. The money supply will be defined as the net sterling deposits of the banks, excluding the Bank of England, plus currency in circulation outside the banks. Factors Affect Money Supply Wee Chin Sheng. Most money in a modern economy is created by commercial bank lending so the rate of interest ultimately does have a bearing on the supply of mone; Key factors affecting the demand for money: The rate of interest on loans; The number / value of monetary transactions that we expect to carry out Start studying FIN3244 Study Guide - Factors Affecting Legal Reserves and the Money Supply. They point toward the following factors which raise it: ADVERTISEMENTS: 1. Cancel Unsubscribe. Factors affecting the value of money also depend on subjective, psychological factors such as perceptions regarding the strength of a national economy. Factors Affecting Demand Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. If there is a steady supply of available goods, then their price declines and the value of money rises relative to what it can buy. ADVERTISEMENTS: Factors which causes Inflation (Factoring affecting Demand and Supply)! The monetary authority while determining the supply of currency and coins must be guided by the general requirements of the economy. 1.6 STATEMENT OF HYPOTHESIS. While any definition must be in some degree arbitrary this … Learn vocabulary, terms, and more with flashcards, games, and other study tools. A rise in the demand for consumer spending. This will enable then to make important choices with regards to trading in foreign currency. 4. Free Essay: Factors Affecting Demand and Supply of Currency. Learn vocabulary, terms, and more with flashcards, games, and other study tools. When price changes, quantity supplied changes. Factors affecting supply. Families in developing countries spend much of their income on food. Inflation rate and growth rate are considered trade-related factors. When you apply the changes in one of these factors to exchange rates, you think … Factors affecting food supply. How Interest Rates are Determined Supply and Demand . Determinants of Supply: Supply can be influenced by a number of factors that are termed as determinants of supply. Some Factors Affecting the Money Supply The money supply 1. A rise in uncertainty about the future and future opportunities. 2. There are many factors affecting supply in economics. In simple terms, supply is the function of price and cost of production. Price If the price of houses increases then there is an increase in supply … 3. ... Quantitative easing involves increasing the money supply. These fluctuations can be large or small depending on the current economic and political state of the country. Main factors affecting the price of gold. Factors That Can Affect the Appreciation or Depreciation of Currency. Money Supply: Velocity of money depends upon the supply of money in the economy. The way in which these factors affect money demand is usually explained in terms of the three motives for demanding money: the transactions, the precautionary, and the speculative motives. The Factors Affecting the Exchange Rate The long-term fundamental factors, determining the exchange rate movements, are the processes in the area of national production and circulation. The latest improvements in digital cameras can drive more demand, a price drop in gym memberships can increase demand for exercise gear, or price increases in organic foods might increase supply from vendors, but drops the demand from price-sensitive consumers. Factors Influencing Currency Money. The value of currency in any country rarely stays constant. Increase in Money Supply: Inflation is caused by an increase in the supply of money which leads […] Currency values usually continuously fluctuate. If you continue browsing the site, you agree to … factors affecting demand and supply of money, The quantity is measured by the money that flows from those who supply financial capital to those who demand it. What factors change supply? between these variables. Two factors can shift the supply of financial capital to a certain investment: if people want to alter their existing levels of consumption, and if the riskiness or return on one investment changes relative to other investments. Factors affecting the supply of houses. Money supply shows the stock of money in the economy at a certain point of time. Through establishing multiple regression model, this paper selected annual data from 1990 to 2008 as sample data, quantitative studied factors affecting money supply and provided reference for drawing up monetary policy in China. Interest rate levels are a factor of the supply and demand of credit: an increase in the demand for money … Since Canadian money is a substitute for American money, international factors will influence the demand for money. It shall also serve as a veritable source of information on issues of macroeconomic Factors and money supply. It can be derived by adding the total financial assets along with the currency in circulation that can perform functions of money. Factors Which Increase the Demand for Money 1. Money supply and GDP do not automatically affect each other, but Money Supply can affect GDP depending on monetary policy; the expressed intention in economic management is to monitor the money supply to allow transactions to take place. Loading... Unsubscribe from Wee Chin Sheng? Cost of Production: Cost of production is the amount of money used in producing a good. 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