Chemical base Eugène Schueller was born in Paris in 1881. His parents, immigrants from Alsace, settled in Paris immediately after the war of 1870 and opened a small pastry shop on the Rue Cherche-Midi. After school, little Eugene helped his parents in the family shop, comprehending

Monetary Incentives Four examples of the use of monetary incentives are given below. You will see how this strategy is used to encourage Indian children to go to school, to convince American youth to join the army, to improve labor discipline.

Monetary disincentives Monetary disincentives, as its name implies, are used to incentivize citizens not to take certain actions. In the following examples, you will see how monetary disincentives are used to persuade citizens

The M0 unit includes cash in circulation: banknotes, metal coins, treasury notes (in some countries). Metal coins, which make up an insignificant share of cash (2-3% in developed countries), enable individuals to make small transactions. Usually these coins are minted from cheap metals. The real value of the coins is much lower than the face value in order to prevent them from being melted down for a profitable sale in the form of ingots.
Treasury notes are paper money issued by the Treasury.
The prevailing role belongs to banknotes.

Monetary aggregate M1

M1 = cash + checkable deposits + checkless savings deposits

The M1 unit consists of the M0 unit and funds on the settlement, special, current accounts of enterprises and organizations, plus the funds of insurance companies, plus demand deposits of the population in commercial banks and the Savings Bank. For settlements using the funds in these accounts, their owners issue payment orders (the predominant form of settlement in the Russian economy), or checks and letters of credit. It is the M1 unit that services operations for the implementation of gross domestic product (GDP), distribution and redistribution of national income, accumulation and consumption.

Factors affecting the monetary aggregate M1

Monetary supply M2

M2 = M1 + small term deposits

Aggregate M2 contains aggregate M1, term and savings deposits in commercial banks, as well as short-term government securities. The latter do not function as a medium of exchange, but can turn into cash or checking accounts. Savings deposits in commercial banks are withdrawn at any time and turn into cash. Term deposits are available to the depositor only after a certain period of time and, therefore, have less liquidity than savings deposits. In the US, the M2 aggregate includes: M1 - 23% (including cash 7% and checkable deposits 19%), savings and time deposits - 74%.

Factors affecting the monetary aggregate M2

1. Market turnover. The revenue of trade organizations, the receipt of revenue from passenger transport depends on its volume and structure.
2. Receipt of taxes and fees from the population.
3. Receipt to accounts on deposits with Sberbank and commercial banks.
4. Cash receipts from the sale of government and other securities.
5. Gold and foreign exchange reserves: their increase creates conditions for an active monetary policy in the open market, in determining the volume of credit resources and allows you to increase the money supply.

Monetary supply M3

M3 = M2 + large term deposits

Aggregate M3 contains aggregate M2, savings deposits in specialized credit institutions, as well as securities circulating on the money market, including commercial bills issued by enterprises. This part of the funds invested in securities is not created by the banking system, but is under its control, since the transformation of a bill into a means of payment requires, as a rule, acceptance by the bank, i.e. guarantees of its payment by the bank in case of insolvency of the issuer.

Aggregate M4 is equal to aggregate M3 plus various forms of deposits in credit institutions.

1) cash and current deposits;

2) cash and time deposits;

3) cash, current and term deposits;

4) highly liquid securities.

This test is an assessment of knowledge on the topic “Money and its functions. Basic monetary aggregates. To answer it correctly, you need to remember what monetary aggregates are and what their structure is. As you know, the amount of money in the country is controlled by the Central Bank. But control without measuring the money supply is impossible. Therefore, to solve this problem, the method of aggregation is used, that is, summation, combining all funds into certain aggregated indicators, called monetary aggregates.

The criteria for allocation of monetary aggregates is the liquidity of various funds. Liquidity refers to the ability to quickly turn this asset into cash without any loss in its value. In accordance with this, the following monetary aggregates are distinguished: M1, M2, M3, M4.

The M1 unit consists of two main elements. First, it is cash, i.e. metal and paper money. Sometimes this part of the M1 assembly is referred to as Mo. And, secondly, these are checking deposits, that is, deposits in commercial banks, savings banks or savings institutions, on which checks can be drawn.

In most countries, cashless payments using checks are a common form of commercial transactions due to their convenience and security. At first glance, it may seem strange that current bank accounts are part of the money supply. But this is easily explained: after all, at the first request of the client, checks and current deposits in banks immediately turn into cash.
Thus, M1 = cash paper and metal money + checking (current) deposits in banks.

The M2 monetary aggregate includes the M1 aggregate, as well as the less liquid part of the financial assets, which primarily include medium-sized term deposits of organizations and individuals. Term deposits, as their name implies, can only be available to the depositor after the expiration of the retention period. For example, a depositor can withdraw without loss three- or six-month deposits only after the expiration of the specified period. If he demands early termination of the agreement concluded with the bank, he is subject to a fine, in accordance with the conditions specified in the agreement. For example, this may be a reduction in the amount of interest due on a deposit to the level of interest on current deposits. Therefore, term deposits have less liquidity than current deposits. This type of deposits is included in the composition of the money supply because after the expiration of the storage period, the depositor receives cash, and this aggregate can also be converted into cash even before the expiration of the storage period, however, with certain losses.

The Mz monetary aggregate includes the M2 aggregate, as well as large term deposits (for example, in the United States, large term deposits include deposits in excess of $ 100,000), as well as certificates of deposit, repurchase agreements. Large deposits are obviously less liquid than small and medium ones, since the depositor will have greater losses in case of early termination of the agreement than in case of termination of agreements on small and medium deposits. However, after the expiration of the retention period, these deposits can also be converted into cash or transferred to a current account. Therefore, the aggregate M3 also refers to the money supply.

The M4 aggregate is the M3 aggregate with short-term treasury bills, savings bonds, commercial bills. With this knowledge, let's analyze the test task. Answer #1 certainly represents the money supply M1. Answer No. 2, although it includes time deposits related to the required aggregate M2, will be incorrect, since M2 is the sum of M1 and time deposits. And the aggregate M1 includes, as noted above, not only cash, but also current deposits in banks. Therefore, answer #2 is incorrect, since the assembly M1 is not fully represented in it.

Consider answer No. 3. It lists all the necessary structural elements of the monetary aggregate M2. That's why option 3 is correct.

Since the tests may have multiple options answers, so let's analyze answer No. 4. The highly liquid securities indicated in it are component monetary aggregate M4, has no direct relation to the monetary aggregate M2.

The article shows comparative statistics from 2000 to 2015: money supply (M2) and cash (M0) in Russia and China. Money supply (M2) and GDP in Russia and China.

Comparative statistics of money supply (M0, M2) and GDP in Russia and China

Money supply (M2) is the sum of cash in circulation and non-cash funds. The money supply has two components:
Cash in circulation (M0)- the most liquid part of the money supply, available for immediate use as a means of payment. Includes banknotes and coin in circulation.
Non-cash funds- balances of funds of non-financial and financial (except credit) organizations and individuals on settlement, current, deposit and other demand accounts (including accounts for settlements using bank cards) and term accounts opened in the banking system in the currency of the Russian Federation, as well as accrued interest on them.

The ratio of Cash (M0) and Money supply (M2) in the Russian Federation:

Ratio of Cash (M0) and Money Supply (M2) in the People's Republic of China:

Comparison of cash (M0) in Russia and China

Comparison of money supply (M2) in Russia and China

GROSS DOMESTIC PRODUCT(GDP)- this is a key indicator of the system that characterizes the value of goods and services produced in the country in all sectors of the economy and intended for final consumption, accumulation and export (minus imports).
GDP can be calculated in three ways:
1. Production,
2. The method of using income and
3. The method of forming GDP by sources of income.
When calculated by the PRODUCTION METHOD, GDP is defined as the difference between the output of goods and services in the country as a whole, on the one hand, and intermediate consumption, on the other, or as the sum of value added created in sectors of the economy. At the same time, the volumes of value added by industry are calculated in basic prices, i.e. do not include taxes on products, but include subsidies on products. To calculate GDP at market prices, net (net of subsidies) taxes on products must be added.
Gross domestic product, calculated using the INCOME USE method, represents the sum of the expenditures of all institutional units - residents of a given country for final consumption, gross capital formation and net exports.
The formation of the gross domestic product by SOURCE OF INCOME reflects the primary income created in the production process by all institutional units grouped into sectors of the economy. In this calculation, gross profit (gross mixed income) is the balancing item and is defined as the difference between the gross domestic product calculated production method at market prices, salaries of employees and net taxes on production and imports.

Comparison of money supply (M2) and GDP of the Russian Federation (RF)

Comparison of Money Supply (M2) and GDP of the People's Republic of China (PRC)

Comparison of Russia's GDP and China's GDP

money supply is the stock of money in the state.

The money supply serves the movement called money circulation.

The totality of all money in a given country with the government, firms, banks, citizens, in accounts, on the road, in wallets, in "stockings", etc. shapes national money supply. Money circulation as a set is divided into cash and non-cash. Non-cash circulation is much higher than cash (Fig. 1):

In countries with an unreliable banking system, the ratio of cash and non-cash money supply looks different (Fig. 2):

The concept of liquidity is used not only in relation to, but also to, the international monetary system, etc. Liquidity in relation to money is their property to be used by their owner for the immediate acquisition of the necessary benefits. Depending on the specific form in which money exists (cash and non-cash), the liquidity of money increases or, conversely, decreases. So, cash is much more liquid than non-cash, and in the non-cash money supply, money on current accounts that can be used by checks, transfers, credit cards, is much more liquid than money on time deposits, since there is a time limit on the latter, during which the account holder does not can use the entire amount of the deposit, but only the interest on it.

• Money in term and savings bank deposits;
• Money on demand deposits (current) checks, bills of exchange, payment orders, credit cards, electronic money, traveler's checks;
• Cash, banknotes, banknotes, treasury bills, small change, securities;

Money Aggregate System

Since 1992, the Russian Federation has moved to the calculation of monetary aggregates.

The money supply is divided by monetary aggregates(from to ), which include different kinds of money.

Monetary aggregates - a grouping of bank accounts according to the degree of speed of transformation of funds in these accounts into cash. How faster means on accounts can be converted into cash, the more liquid the aggregate is considered.

The system of money supply aggregates is "matryoshka", in which each previous aggregate is "inserted" into each subsequent one.

Monetary aggregate М0

To the unit M 0 includes all types of money with a high degree of liquidity.

different types of money and different types allow you to introduce a certain classification of money, depending on the degree of their liquidity and scope. This found expression in the creation of a system of money supply aggregates used in the analysis of the national systems of money circulation in various countries. The original unit includes cash and checks:

M 0 = C + checks,

where FROM— initial money supply (cach).

Cash, in turn, consists of paper money, banknotes and change coins.

1st sign. Cash is issued into circulation by the Russian Federation, then the Central Bank of the Russian Federation takes measures to preserve its purchasing power. Thus, cash is a debt obligation of the Central Bank of the Russian Federation, that is, the Central Bank of the Russian Federation guarantees their purchasing power.

2nd sign. Non-cash money on current settlements and other demand and term accounts. These are debt obligations to their customers. At the same time, the Central Bank of the Russian Federation controls and regulates the activities of commercial banks, ensuring the liquidity of commercial banks, that is, the ability to pay their debts.

3rd sign. Banknotes, coins, non-cash money in the form of an entry on accounts in circulation are legal tender. Therefore, they are accepted as payment for contracts according to their functions.

4th sign. Modern money (in the narrow sense of the word) is convenient and acceptable for people to use.

5th sign. M 1 has absolute liquidity, so M 1 banknotes that perform the functions of money.

Monetary aggregate M2

In addition to money, that is, the aggregate, the composition of the money supply includes purchasing and payment means that do not have absolute liquidity. These include bills, bonds, certificates of deposit. In non-cash form: term deposits in bank accounts.

Unit M 2 complements to M 1 term deposits:

M 2 \u003d M 1 + term deposits.

With a term deposit, the account holder transfers his funds to the bank for some time. If necessary, money can be withdrawn from a term deposit before the due date, but the client may experience losses (interest on the deposit has not been paid). This shows that the term deposit is almost money. In the conditions of the Russian Federation, the liquidity level of the aggregate is close to absolute, therefore, usually, a term deposit is issued to the client on demand.

Funds on time deposits further reduce the liquidity of the aggregate M 2 compared with M 1 and M 0 and involve the maintenance of savings, savings, investments.

Monetary aggregate M3

Unit M 3 involves an increase in the aggregate M 2 at the expense of:

M 3 \u003d M 2 + government securities.

These papers (mainly government bonds) are no longer fully valuable money, but nevertheless they can be transformed into other types of money (sold on the open market) and, on this basis, they are included in the money supply (Fig. 3).

The structure of the money supply

The structure of the money supply is constantly changing.

In the modern monetary system, the growth rate of the money supply has noticeably decreased and money began to work better. In the Russian Federation, among the shortcomings of the monetary system, one can note a large share of cash (42-65%), while in developed countries this figure barely reaches 7-10%.

The ratio between aggregates changes depending on economic growth.

The change in the money supply is the result of the influence of two factors:

• change in the amount of money in circulation;
• change in their turnover rate.

Change in turnover rate

The velocity of circulation of money is determined using indirect methods:

Velocity of circulation of money in the circulation of income= GDP / Money supply (M1 and M2). This indicator reveals the relationship between economic growth and money circulation.

Cash turnover rate= Arrival according to the forecast of the balance of cash turnover / the average annual value of the money supply in circulation.

Turnover of money in the payment turnover(shows the speed of non-cash payments) = The amount of funds in the settlement, current and probable accounts (bank accounts) / the average annual value of the money supply in circulation.

• general economic factors showing how production is going, how the cyclicity is changing economic development, rising prices, growth rates of the most important sectors of the economy;
• monetary factors: what is the structure of the payment turnover (how much cash and non-cash money is involved), the development of credit operations, the development of mutual settlements, the level interest rate on credit;
• the frequency of payments of money and income, the level of savings and savings, the uniformity of spending money.

The effect of inflation on the growth of the velocity of money is explained by the fact that buyers increase their purchases in order to protect themselves from economic losses due to a decrease in the purchasing power of money.

Rules for regulating the structure of the money supply

It is necessary to divide the money supply by , , , if you need to provide state regulation volume of money supply and prevent the unforeseen (rising prices).

When circulating money, it is important not only the amount of absolutely liquid money M1, but also the amount of money M2, which can quickly turn into M1. Also M3 may, under certain conditions, become a means of payment M1.

By distributing the money supply to aggregates, the Central Bank of the Russian Federation influences the money supply M1, increasing it or decreasing it (or restraining its growth).

Example. In the event of high inflation, the Central Bank pursues a policy of reducing the M1 money supply. To do this, the Central Bank sells, on behalf of the government, state securities of a large denomination of other firms, banks, i.e. M1 - M3 (the money supply M1 decreases).

For the population, the Central Bank of the Russian Federation sells securities of a smaller denomination and M1 - M2, the money supply M1 decreases.

rule: if the money goes to the banking system for a term deposit or to the budget, the money supply M1 decreases, the money leaves the sphere of circulation M1.

If the Central Bank of the Russian Federation raised the interest rate at which banks are lending, in turn, commercial banks raise the interest rate on time deposits.

It has become profitable for people (depositors) to make time deposits - M2 increases, and M1 decreases - inflation is contained.

For the term of the deposit, the money was placed at the disposal of the banking system (- M2).

Monetization ratio

An important indicator of the state of the money supply is monetization ratio, equal to

The monetization coefficient allows you to answer the question: is there enough money in circulation? It shows how the gross product is backed by money (or how much money is per ruble of GDP).

The monetization coefficient reaches 0.6, and sometimes close to one. In Russia, this figure barely reaches 0.1.