A Federal Reserve Bank has hired the economic consulting firm to prepare a paper on how the use of money has changed over the past 20 years. This paper will be used to help make decisions on how to regulate the nation's banks.
In an e-mail to your manager, explain the role of technology in the evolution of how money is used by consumers. What has happened to the velocity of money because of technology? As an example, calculate the velocity of money when the price level is 10, the national quantity of output is $200 billion, and the money supply is $250 billion.
// We very well know that, there is a change in the trends, the money is used by the consumers in the last few years and that is, because of the change in technology. The velocity of money is affected by the new technological developments that are a part of nation's economic systems and the banking systems. //
We know that this is a time of globalization and the boundaries have almost been nullified by the increased use of technology; there are marked changes as liberalization of the economy has encouraged free trade. The new trends in technology has made it possible to do major transactions without actually using the physical form of money. The debit and credit cards are increasingly used; the use of electronic money has completely changed the trade among countries. It is mostly used over the internet and the role of banks has seen a transformation because of the facilities being provided, of advanced payments and credit for increasing businesses well, including all the factors has resulted in the complete re-formulation of the traditional ways in which, the money was used (Bogaski, n. d.)
The major factor is the increased use of the electronic money, as it has affected the ability of banks to control the money supply. Use of new digital money has decreased the need to conduct the open market operations, as the supply of money for transactions would automatically, adjust to demand. The use of electronic money has also affected the velocity of money. We need to know, the money supply in the end and the national income in that period to calculate the income circulation velocity, is not a very effective measure to see the ...
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