How does a countries government work out how much cash should be in circulation?
Answer:
The supply of money that a federal government allows to be out in the market depends on many things,inflation,interest rates,bond markets ,the amount of credit available to that country.To go a little further if inflation is high they will increase interest rates and thus restrict the amount of money out there.Current economist Friedman is now looking at how the world economy is changing as we open our borders to more free trade any one government can not effectively control the money supply as corporations will just borrow from other nations that have lower rates and thus increase the inflationary trend.You also have to consider how much that particular country is in debt.which limits the amount of money that it can borrow on the bond market.This is a very short answer to a very complicated question.I have read many books on the subject and have a masters degree in economics and I still do not understand completely how the system works as Joh K. Galbraith did not understand it completely.Iwrote my asters thesis on how credit is now the forth source of money.If you want t to know how much englis money is out there you will have to check on all three forms of money is available in the englis economy,cash,stocks,bods/deben. subtract the national debt(yes it will be negative as the world is currently running a defict economy )
By the value of its resources
£2.50
LOL They make it as they go along...!
Equal to the gold reserves, unless you live in Africa.
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