Money Supply

Apr 25, 2021 Sin categoría
Money supply

Financial institutions, services they provide and explain their role in expanding money supply

By Arley Avila

Whether you are an employee, an employer, an individual, a student, an entrepreneur, an LLC, a corporation or any type of person, institution or organization, you will always have a need at some point of stage of the process of requiring the services and or product of a financial institution. Financial institutions are those that are engaged in all that involves transactions; in contrary to popular believe financial institutions are not just banks, they also include: trust companies, investment firms, private equity firms, brokerage firms and even insurance companies amongst others. These financial institutions are in charge of connecting money lenders with money suppliers, loans, investments, currency exchange, equity investments etc. 

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Financial institutions also come in every size from you local community credit union center to even global entities to meet any market needs. In order to expand the money supply lets take the example of a bank, it assumes that at no particular point in time all of the clients will withdraw all of the funds from their accounts, this means that when a deposit is made to a bank, the actual money is not saved as a cash account it only increases your available balance. Once the bank has the money that is deposited, it will add a portion to its reserves and the rest is lends to people, institutions, banks, and even governments, these banks will charge an interest for the money it lends and it will expand the money supply from the interests, and also applying the money multiplying formula and factors to ensure that this expansion of the supply is met. 

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04/17/21) Exploring Business, “13.2, Financial Institutions” Increasing the Money Supply

13.2 Financial Institutions – Exploring Business (umn.edu)

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