Friday, April 8, 2016

Unit 4 fiscal notes

When a customer deposits cash or withdraws cash from their demand deposits account, it has no effect on the money supply:
  • It changes:
    1. The composition of money
    2. Excess Reserves
    3. Required Reserves
*When the FED buys or sells bonds, ER is created

                 

 ER x Multiplier

    • find the multiplier (1/reserve ratio)

Single Bank
  • Loan money from ER
Banking System
  • ER x Multiplier= Total Money Supply
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1 comment:

  1. UnknownApril 8, 2016 at 4:39 AM

    Your notes are great! But could you elaborate more on single banks and banking system? I get what the are but how do you find them and does it always apply! Other than that it's great.

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