928 B
928 B
Circulating Money
Definition
The portion of a nation's money supply that facilitates the exchange of goods and services in regular commerce. Smith distinguishes this from hoarded treasure or plate, noting that the amount of circulating money is naturally determined by the volume of transactions in an economy and cannot be artificially increased without causing inflation.
Source Chapter
Book IV, Chapter 1
Context
Smith argues that circulating money represents a small and necessary part of national capital, and that attempts to increase its quantity through artificial means are futile. He explains that the channel of circulation naturally draws to itself only the amount needed to facilitate trade, and that excess money will simply flow abroad.
Economic Domain
Exchange