chapter 16 Determinants of the Money Supply Money
- Slides: 11
chapter 16 Determinants of the Money Supply
Money Multiplier M = m MB Deriving Money Multiplier R = RR + ER RR = r. D D R = (r. D D) + ER Adding C to both sides R + C = MB = (r. D D) + ER + C 1. Tells us amount of MB needed support D, ER and C 2. $1 of MB in ER, not support D or C MB = (r. D D) +({ER/D} D )+ ({C/D} D) = (r. D + {ER/D} + {C/D}) D Copyright © 2001 Addison Wesley Longman TM 16 - 2
D= 1 MB r. D + {ER/D} + {C/D} M = D + ({C/D} D ) = (1 + {C/D}) D M= 1 + {C/D} MB r. D + {ER/D} + {C/D} m = 1 + {C/D} r. D + {ER/D} + {C/D} m < 1/r. D because no multiple expansion for currency and because as D ER Full Model M = m (MBn + DL) Copyright © 2001 Addison Wesley Longman TM 16 - 3
Excess Reserves Ratio Determinants of {ER/D} e 1. i , relative RET on ER (opportunity cost ), {ER/D} 2. Expected deposit outflows, ER insurance worth more, {ER/D} Copyright © 2001 Addison Wesley Longman TM 16 - 4
Discount Loans and Interest Spread Determinants of DL 1. i , i – id , DL 2. id , i – id , DL Copyright © 2001 Addison Wesley Longman TM 16 - 5
Factors Determining Money Supply Copyright © 2001 Addison Wesley Longman TM 16 - 6
Money Supply Copyright © 2001 Addison Wesley Longman TM 16 - 7
Determinants of the Money Supply Copyright © 2001 Addison Wesley Longman TM 16 - 8
Deposits at Failed Banks: 1929– 33 Copyright © 2001 Addison Wesley Longman TM 16 - 9
{ER/D}, {C/D}: 1929– 33 Copyright © 2001 Addison Wesley Longman TM 16 - 10
Money Supply and Monetary Base: 1929– 33 Copyright © 2001 Addison Wesley Longman TM 16 - 11
- Chapter 16 determinants of the money supply
- Chapter 16 determinants of the money supply
- Chapter 16 determinants of the money supply
- Simple deposit multiplier
- Money money money team
- 5 determinants of supply
- Non price determinants of supply
- Non price determinants of supply
- Determinants of demand
- 5 determinants of supply
- Determinants of supply
- 5 determinants of supply