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Measuring The Money Supply And Essay

Nonetheless, M2 when adjusted for changes in the price level, is still a component of the Index of Leading Indicators, and some market analysts use it to forecast economic recessions and recoveries (Federal Reserve Bank, 2008). Measuring the money supply is not without controversy. The policy of manipulating the money supply in order to control inflation is based on the idea that the more money there is in circulation, the more money there is chasing fewer goods, resulting in higher prices and vice versa. Governments have the ability to control the amount of money in circulation. They do this by stimulating demand by printing more money or by reducing demand by removing money. The process of achieving specific targets is difficult and governments frequently miss their goals, resulting in recessions and booms, all of which make up the economic cycle (Benson, 2007).

Skeptics in the financial markets maintain that the Fed stopped publishing information on M3 not...

Some analysts argue that by no longer reporting the total amount of money in circulation, the Fed is able to hide a huge amount of money creation, which is then used to fund the U.S. trade deficit (Benson, 2007).
As this discussion shows, the total money supply available in a given economy is difficult to determine, because of various ways of defining money and different ways of measuring it.

Works Cited

Benson, I. (2007). Jargon-free investment guide. Retrieved December 31, 2011 from: http://www.jargon-free.com/money-supply-m1-m3/30/

Federal Reserve Bank of New York. (2008). The money supply. Retrieved December 31, 2011 from: http://www.ny.frb.org/aboutthefed/fedpoint/fed49.html

WebFinance. (2011). M0. Retrieved December 31, 2011 from: http://www.investorwords.com/6571/M0. -- and my number is [HIDDEN] or [HIDDEN] -- and my number is [HIDDEN] or [HIDDEN]

Sources used in this document:
Works Cited

Benson, I. (2007). Jargon-free investment guide. Retrieved December 31, 2011 from: http://www.jargon-free.com/money-supply-m1-m3/30/

Federal Reserve Bank of New York. (2008). The money supply. Retrieved December 31, 2011 from: http://www.ny.frb.org/aboutthefed/fedpoint/fed49.html

WebFinance. (2011). M0. Retrieved December 31, 2011 from: http://www.investorwords.com/6571/M0. -- and my number is [HIDDEN] or [HIDDEN] -- and my number is [HIDDEN] or [HIDDEN]
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