The supply of money

The supply of money in an economy is determined by the central bank, commercial banks and foreign exchange flow of money. The central bank influences the supply of money by creating new money that it lends to commercial banks.

Commercial banks affect the supply of money by borrowing money and lending money. Commercial banks can lend the same money several times, creating a larger money supply in the economy. Currency flows affect the supply of money, money that is flowing into the country and out of the country.