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© 2004 Pearson Addison-Wesley. All rights reserved 15-1 Multiple Expansion of Money and Credit: Fed buys bond from bank / bank lends to limit public holds no currency
© 2004 Pearson Addison-Wesley. All rights reserved 15-2 Simple Deposit Multiplier D = demand deposits r = required reserve ratio RR = required reserves = r x D R = available reserves 1 D = R r Deriving the formula R = RR = r D 1 D = R r 1 D = R r
© 2004 Pearson Addison-Wesley. All rights reserved 15-3 Deposit Creation: Banking System as a Whole Banking System Assets Liabilities Securities– $100Deposits+ $1000 Reserves+ $100 Loans+ $1000 Critique of Simple Model Deposit creation is slowed if: 1. Some proceeds from loan kept in cash 2. Bank holds some excess reserves
Multiple Deposit Creation and the Money Supply Process
M1: The Narrowest Definition of the Money Supply: Means of Payment How Is Money Measured in the United States Today? Measuring the Money Supply, May 2007.
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Chapter 16 Determinants of the Money Supply. © 2004 Pearson Addison-Wesley. All rights reserved 16-2 Deriving a model of the money supply process Because.
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Chapter 14 Determinants of the Money Supply. Copyright © 2007 Pearson Addison-Wesley. All rights reserved The Money Supply Model Define money as.
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