This document discusses money supply and related economic indicators in the United States, European Union, and China. It provides definitions of M0, M1, M2, and M3 money supply aggregates. It notes that declines in money supply have historically led to economic downturns in the US, while increases have preceded inflation. Recent money supply trends and their economic impacts are described for the US, EU, and China. The relationship between money supply, GDP, inflation, and other factors are examined for each region. The document concludes that maintaining a stable money supply is important for stable interest rates, prices, and economic growth.

1.  Stephen Spears – Team Leader
 Frank Bernal – Researcher
 Donald Parkhurst – Researcher
 Cortney Coyne – Voice Talent
 Van Vayner - Editor

2. 
Money Supply - The total supply of money in circulation in a given country's economy at
a given time

M0, the total of all physical currency, plus accounts that can be exchanged to physical
currency

M1, a narrow measure of money’s function as a medium of exchange

M2, a broader measure that also reflects money’s function as a store of value

M3, a still broader measure that covers items that many regard as close substitutes for
money

3.  In 2006 the Federal Reserve stopped
publishing M3 data, however, private sources do
give estimates of M3.
 The U.S. money supply has grown from its all
time high in the 2008 to an all time low in 2011.
Although since the 3rd quarter of 2011 the money
supply has increased and shows extremely small
signs of increasing.
 The Money supply decreased from about
2008 to 2011, which caused unemployment to
increase at staging rates, prices to decrease, and
home values to plummet.

4.  Due in large part of the global financial crisis
that began in 2008, the European Union has
increased the money supply slightly.
 The makeup of the Union makes the control of
its money supply difficult at best and impossible at
worst.
 The EU continues to struggle to gain
momentum to a stable economy like the US and
much of the world as a hole.

5.  China’s money supply has shown a steady
increase for the past decade, 2008 saw a much
more rapid increase in the amount of money in the
Chinese economy.
 A major factor for this increase in money
supply has to do with the exchange rate, which is a
process in every currency in the world, is valued.
 Depending on this value is how many
Chinese Yuan one will receive in exchange for one
US dollar.
 China has been receiving much criticism of
their valuation process of other countries currency.
 Regardless China holds a large amount of
foreign reserves which contribute to its money
supply.

6. 
An increase in the supply of money works both through lowering interest rates by
putting more money in the hands of consumers.

If the money supply continues to expand, prices begin to rise. This inflation leads
higher interest rates to offset an expected decline in purchasing power over the life
of loans.

When the supply of money falls or when its rate of growth declines Economic
activity declines and either disinflation or deflation are results.

Other leading economic indicators of world economies are Gross Domestic Product
(GDP) per capita, often considered an indicator of a countries' standard of living,
and Consumer Price Index (CPI), a measure for inflation. They also play an
important role of economy’s health and economic performance.

7.  From 1998 to 2008 the  Like much of the China’s rise in GDP has
Gross Domestic Product globe the EU’s GDP been a slow and steady
(GDP) showed steady has been affected by increase since the 1980’s.
growth. In 2008 GDP started the global financial However, since about 1992
a steady decrease until meltdown. Like the US China’s GDP has seen rapid
2011. As GDP decreased the EU continues to growth and it continues today.
job creation slowed, which see a decline in GDP. Even though China’s in
lead to increased inflation. The chart above shows experiencing an increase in
2011 saw an increase in the relationship GDP, low-income wage
GDP compared to previous between the US and earners see little to no change
years but the future is still the EU’s GDP. in their lives. As China’s
unclear as the U.S economy economy continues to grow
struggles to regain making china an extremely
momentum. strong member of the global
economy.

8.  A continued growth of the  After an increase in its  The chart above
Consumer Price Index (CPI) money supply in 2008, that
from the 4th quarter of 2009 to clearly illustrates China’s
triggered an increase in consistent CPI increase
the end of the 1st quarter of inflation the EU’s CPI
2012. This means that there over the past 3 decades.
increased markedly. Gross A slight dip in 2008 was a
is an increase in imports of Domestic Product (GDP)
goods which correlates to the result of the global
and money supply has since financial crisis which had
price of goods and services in leveled off, but the CPI has
the U.S. to increase. Although an impact on financial
continued to increase markets across the
in recent years the CPI has slowly. CPI”s that rise
shown a steady increase, globe. A rise in China’s
slightly over time is a sign of CPI is typically due to an
unemployment remains at a a stable economy.
high contributing to inflation. increase in money
supply.

9. United States
European Union
 Since 1914 a sustained decline
of the money supply has occurred
 (Recent History)In November
during only three business cycle 2011, it was reported by The
contractions: 1920–1921, 1929– Telegraph that the EU's money
1933, and 1937–1938. The severity supply was rapidly falling. This has
of the economic decline in each of led to fears that countries that are
these downturns was a consequence part of the EU may default on
of the reduction in the quantity of several major debts. If this comes to
money, the decline in output and rise pass it would mean a severe
in unemployment. economic downturn for the EU.
 Since 1914 there have been
three major price inflations; each has
been preceded and accompanied by
an increase in the rate of growth of
the money supply: 1914–1920,
1939–1948, and 1967–1980. In
each case a increase of money
supply that outstripped real output
led to inflation.

10. 
In conclusion we feel that money supply should be held stable. A large growth in
money supply invariably leads to inflation and higher interest rates. A downturn in
money supply leads to deflation/disinflation and a slow down in consumer
spending. If this slowdown is severe enough, it could lead to loss of jobs and a
more troublesome downturn. Keeping a stable money supply would assist in
keeping interest rates in check, prices stable and give consumers enough money
spend, thus growing the economy.

11. • ECB Statistical Data Warehouse. (n.d.). ECB Statistical Data Warehouse. Retrieved from
http://sdw.ecb.europa.eu/
• Evans-Pitchard, A. (2011, November 28). "Europe's Shrinking Money Supply Flashes Slump Warning." The Telegraph. Retrieved
from
http://www.telegraph.co.uk/finance/financialcrisis/8921720/Europes-shrinking-money-supply-flashes-slump-warning.html
• Money Supply Charts. (n.d.). Shadow Government Statistics. Retrieved from
http://www.shadowstats.com/alternate_data/money-supply-charts
• Money Supply. (n.d.) What Is ? Definition and Meaning. Retrieved from
http://www.investorwords.com/3110/money_supply.html
• Schwartz, A. (n.d.). Money Supply. The Concise Encyclopedia of Economics. Retrieved from
http://www.econlib.org/library/Enc/MoneySupply.html
• Credit & Money Supply in the USA and China. (n.d.). Economics Junkie. Retrieved from
http://www.economicsjunkie.com/credit-money-supply-in-the-usa-and-china
• Consumer Price Index (2005 = 100) in China. (n.d.). TradingEconomics.com. Retrieved from
http://www.tradingeconomics.com/china/consumer-price-index-2005--100-wb-data.html
• Consumer Price Index. (n.d.). Bureau of Labor Statistics. Retrieved from
http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CU_cpibrief
• Euro Area Inflation Rate. (n.d.). TradingEconomics. Retrieved from
http://www.tradingeconomics.com/euro-area/inflation-cpi
• Expected Developments and Associated Opportunities and Risks. (n.d.). Management Report on the Group. Retrieved from
http://www.thyssenkrupp.com/financial-reports/10_11/en/expected_developments.html
• Global Gold Supply vs. the Money Supply. (2009, 28 January). Global Gold Supply vs. the
Money Supply. Retrieved from http://goldnews.bullionvault.com/gold_money_supply_012820093
• Gross Domestic Product. (n.d). Euro Economics. Retrieved from
http://www.unc.edu/depts/europe/euroeconomics/GDP.php
• The Street Light. (2011, October 31). The street Light Blog. Retrieved from
http://streetlightblog.blogspot.com/2011_10_01_archive.html
• United States GDP per Capita. (n.d). TradingEconomics. Retrieved from
http://www.tradingeconomics.com/united-states/gdp-per-capita