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5. How does the banking system affect currency supply?
Banking systems use several methods, called monetary policy, to increase or decrease the amount of
money in the economy. To ensure a nation's economy remains healthy, banks regulates the amount of
money in circulation. Banking system are influencing interest rates, printing money, and setting bank
reserve requirements are all tools central banks use to control the money supply. The Fed can also
increase the money supply by lowering the reserve requirements for banks, which allows them to lend
more money. Conversely, by raising the banks' reserve requirements, the Fed can decrease the size of the
money supply.
Example: Setting the Reserve Requirement
One of the basic methods used by all central banks to control the quantity of money in an economy is
the reserve requirement. As a rule, central banks mandate depository institutions to keep a certain amount
of funds in reserve. Thus, a certain amount of money is always kept back and never circulates. When the
central bank wants more money circulating into the economy, it can reduce the reserve requirement. This
means the bank can lend out more money. If it wants to reduce the amount of money in the economy, it
can increase the reserve requirement. This means that banks have less money to lend out and will thus be
pickier about issuing loans.
Another example is Influence Interest Rates
In most cases, a central bank cannot directly set interest rates for loans such as mortgages, auto loans, or
personal loans. However, the central bank does have certain tools to push interest rates towards desired
levels. For example, the central bank holds the key to the policy rate the rate at which commercial banks
get to borrow from the central bank. When banks get to borrow from the central bank at a lower rate, they
pass these savings on by reducing the cost of loans to their customers. Lower interest rates tend to
increase borrowing, and this means the quantity of money in circulation increases.
6. The CREATE law reduces taxes from corporation as well as it imposes additional tax
exemption to some business activities. On the other hand, the government, among
others, proposes to build a vaccine facility, continues with its dolomite project,
continues to spend funds for “ayuda” and for the “build-build-build project”, all of
which necessitates a huge amount of spending public funds. Using how our
monetary system works, how all of these things affects inflation?
Government spending, even in a time of crisis, is not an automatic boon for an economy's
growth. The impact of government spending also depends on the state of the economy. If the
economy is close to full capacity, then higher government spending may cause inflationary
pressures and little increase in real GDP. If the economy is in recession, and the government
borrows from the private sector, it can act as an expansionary fiscal policy to boost economic
growth. One possible justification is that an increase in government purchases might drive up the
cost of production. In turn, this would drive up inflation. So long as the Federal Reserve does not
counteract this increase with restrictive monetary policy, the increase in inflation might drive
down the real interest rate. A lower cost of borrowing might drive up households consumption
and businesses investment in equipment and structures. Government spending stimulus might
increase output indirectly though inflation.
7. Using how our monetary system works, how does our productivity affects currency?
Using how our monetary system works, high productivity affects currency by example:
 Banks assume responsibility for consumer deposits and make money by loaning out
deposited funds. Therefore, banks with relatively higher deposits are able to supply a
larger amount of loanable funds. The supply of loanable funds directly impacts growth
and interest rates in an economy. Typically, an increase in the supply of loanable funds is
associated with a decrease in interest rates. So, the greater the accessibility of loanable
funds, as conferred by access and cost, the greater opportunity for businesses and
consumers to make investment purchases and increase production and labor supply, and
these factors can make our country productive. Also by a decrease in interest rates, it is a
great opportunity for people and businesses to increase production and can contribute to
the country’s productivity. Decrease in interest rates also promotes lower inflation and
tends to increase the value of the currency in the long term.

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5. How does the banking system affect currency supply?

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