Dawari Akobo DP17MBA0967Money is anything that is generally accepted as a medium of exchange, including piece, cash notes, debit cards and cheque. Money is printed or minted in every nation’s economy; nonetheless the central bank controls the money supply in most nations. All monies held by the public can be attested as money supply, including transaction account balances, cash or travelers cheque. An account that allows direct payment to a third party is called a bank account.
For example purchase can be made from local farmers via cheque or debit card. The circulation of currency and coin outside the bank account is referred to as cash. Non-banks issue travelers’ cheque such as the American Express.
The amount of money or sum is the total amount of money available to a country at a given time and this is basically the money supply. Money demand increase means a shift of money demand curve which is downward sloping in an interest rate – amount of money demand in real terms space. Money demand (household appetite to save, consume or to invest from interest rate hike) is related to the demand of transaction. The more demand of transaction carried out, the more money demand. When money demand increase for all interest rate level, the quantity of money demand will increase.
Thus the whole money demand curve shift right wards.On the other hand the return from money a person pays to obtain a loan is the interest rate. Financial institutions make gains when money is lent out and the borrower is expected to pay the principal plus interest on the loan that is a percentage on the loan.
The amount of money in circulation is detrimental from interest rate. The CBN may increase or lower the discount rates, which are charges from banks when borrowing money to either constrict or expand the money supply. More loans are made available when discount rates are lowered vis a vies interest rate are lowered by banks to loan seekers. The discount rate is raised when the CBN wants to reduce the amount of money in circulation, it raises the discount rate, which results in higher interest rate and fewer loans. Changes in money supply are considerably determined in interest rates and iinflationary rates as is dictated in macroeconomic variables.