endogenous money

Definition

Economics

  • noun money which is an asset to the individual or firm holding it, but which is a liability to someone else. The theory is that money has to be actually in a bank before it can be lent to someone, in other words, the financial sector reacts to production and prices in the real world. The opposite, exogenous money or outside money, is money which is put into the production system from outside and production and prices react to the financial sector.
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