Tuesday, April 14, 2015

How Does the Fed Determine How Much Physical Currency to Print Every Year?

All economists agree that in considering what is the full money supply one must go well beyond physical currency and includes funds in checking accounts and many other items. Physical currency is actually a relatively minor item relative to the entire money supply. It accounts for roughly only 10% of what the Fed measures as M2 money supply.

That said, the Federal Reserve has ordered from the Treasury 7.2 billion of physical notes for the year 2015.

Michael Lambert, an associate director at the Board of Governors, discussed how the Fed determines how many notes need to be ordered in a video.

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