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Username: PrettyWoman Rating:  Asked to: Dara Madee Date Created: 30 Dec 2014 |
| Category | 17 |
| Tag | Forex |
| Question | Does policy impact on the currency? |
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Hello Pretty Woman, Every forex trader knows that the value of all financial instruments including the currency price is determined by supply and demand. Therefore, the real money supply in the economy influences the currency value. In this case, the money supply is the total amount of funds available in the economy. Thus, an increase of investments and expenses has a beneficial effect on the economy stimulating its growth. A completely opposite effect appears if the money supply decreases. Therefore, it is very important to control the money supply growth. Too heavy offer leads to inflation growth and a low one, in its turn, can halt an economic development. Restrictive and stimulating monetary policies are aimed at reducing or increasing the money supply. Typically, policymakers use interest rates setting or changing the minimum of required bank reserves for such control. |
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