Economic Growth: An Analysis Of Monetary Growth

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Before start talking about monetary growth we need to clearly understand how it is happening; what drives money, which money aggregates equipped and how it is structured. First of all, I would like to examine what is the money supply, because on this base is considered every money growth.

Money supply (or money stock) - is the total amount or monetary assets available in an economy at a specific time. Another words we can say that it is the sum-total of cash in circulation, bank deposits and balances in the accounts at the disposal of individuals, legal entities and the state.

Money supply makes movement of money stream, which called currency. The sum-total of all money in the given country, which the government, firms, banks, citizens,
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Influence of inflation on growth velocity of the money explained due to the fact that buyers increase their purchases in order to protect themselves from the economic losses owing to the decrease in purchasing power of money.

The coefficient of monetization

The important indicator of status of money supply step forth the coefficient of monetization that is equal to:
C=M2/GDP
The coefficient of monetization permits to answer if there is enough money in circulation. It shows how much GDP provided with money (or how much money is there for $ GDP). In developed countries this coefficient come to 0,6 or even close to
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European Monetary System is a form of organizations of monetary relations between member states of European Economic Community (EEC), which connect European currencies and prevent heavy fluctuations between their respective values. As part of European Monetary System was created the European Exchange Rate Mechanism (ERM), which gave an ability to reduce instability of exchange rate (fluctuations like +/-2.25%) and to get monetary stability within preparation for Economic Monetary Union and the introduction of a single currency, the euro. During this period existed a basket of the currencies of the European Community member states, which was used as the unit of account and was weighted according to the size of the member state’s economies; it was named the European Currency Unit

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