How Central Banks Control the Supply of Money

The quantity of money circulating in an economy affects both micro and macroeconomic trends. At the micro level, a large supply of free and easy money means more personal spending. Individuals also have an easier time getting loans such as personal loans, car loans, or home mortgages. 

At the macroeconomic level, the amount of money circulating in an economy affects things like gross domestic product, overall growth, interest rates, and unemployment rates. The central banks tend to control the quantity of money in circulation to achieve economic objectives and affect monetary policy. Through this article, we take a look at some of the common ways that central banks control the quantity of money in circulation.

By Prableen Bajpai, CFA (ICFAI) | Updated May 8, 2017 — 12:58 PM EDT

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World Bank warns Libya faces economic collapse

A recent World Bank report has claimed the Libyan economy is "near collapse" due to inflation and lack of oil production. The report, titled "Libya's Economic Outlook - October 2016" suggested that Libya's lack of exploitation of its main resource, oil, is partially to blame for the country's economic problems. Libya also faces inflation and trade deficit issues, as well as political instability due to the fall of dictator Moammar Gadhafi five years ago.

"With oil production just a fifth of potential, revenues have plummeted, pushing fiscal and current account deficits to record highs. With the dinar (Libya's currency) rapidly losing value, inflation has accelerated, further eroding real incomes," the report said.

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