Final answer:
The net increase or decrease in cash is detailed on the cash flow statement, which includes operating, investing, and financing cash flows. The current account reflects a country's net cash flow from international transactions and influences a nation's cash reserves. In terms of monetary supply, changes in M1 occur with daily transactions, while M2 includes broader savings and time deposits.
Step-by-step explanation:
The net increase or decrease in cash can be found on the company's cash flow statement, which is one of the key financial statements prepared by businesses. The cash flow statement provides detailed information about how much cash is generated or used over a specific period, categorized into three main activities: operating, investing, and financing activities. A net increase in cash indicates that the company has more cash at the end of the period compared to the beginning, often due to profitable operations or from financing sources, such as loans or new stock issuance. Conversely, a net decrease suggests that the company has spent more cash than it has taken in, potentially due to substantial capital expenditures or repayment of debt.
When referring to monies flowing in and out of a country, it relates to the country's current account, which is a component of its balance of payments. The current account records the inflows and outflows of goods, services, and unilateral transfers during a specific period. A negative current account balance, often referred to as a current account deficit, occurs when a country's imports and monetary transfers out of the country exceed the exports and monetary transfers into the country. Such a deficit could lead to a decrease in the nation's cash reserves, while a positive balance, or surplus, leads to an increase. The relationship between national savings, investment identity, and demand for capital also plays a crucial role in understanding the flow of funds in an economy.
In the context of monetary aggregates like M1 and M2, the net change in cash can also be analyzed. M1 includes cash and coins in circulation, checkable bank deposits, and travelers checks. M2 consists of M1 plus savings accounts, small time deposits, and money market mutual funds. Transactions such as depositing money into a checking account would increase M1 while not affecting M2.