CHAPTER 8 Who Controls the Money Supply and

Exhibit 8 -1 M 2 Money Supply ≡ M 2 Money Multiplier Monetary Base

Exhibit 8 -2 Framework for Conceptualizing Causes of Monetary Base Changes Copyright© 2008 South-Western,

Exhibit 8 -3 What Causes Changes in the Monetary Base? Copyright© 2008 South-Western, a

Exhibit 8 -4 What Causes the Monetary Base to Increase? Copyright© 2008 South-Western, a

Exhibit 8 -5 Assets a Central Bank Could Purchase to Increase the Monetary Base

Exhibit 8 -6 Assets Purchased by Central Banks Copyright© 2008 South-Western, a part of

Exhibit 8 -7 Sources of Money Supply Changes Copyright© 2008 South-Western, a part of

Exhibit 8 -8 Effects of Different Reserve Requirements Copyright© 2008 South-Western, a part of

Exhibit M 8 -1 Effects of a $10 Million Withdrawal from a Bank with

Exhibit 8 -9 Monetary Effects of Open Market Operations Copyright© 2008 South-Western, a part

Exhibit 8 -10 Dominant Type of Open Market Operations and Securities that Central Banks

Exhibit 8 -11 Monetary Effects of Foreign Exchange Market Intervention Copyright© 2008 South-Western, a

Exhibit 8 -12 Monetary Effects of Discount Rate and Discount Loan Changes Copyright© 2008

Exhibit 8 -13 Standing Facilities at the Central Banks of Major Industrial Nations: 2002

Exhibit 8 -14 Stock Market Prices of Seven Blue Chip U. S. Companies, 1929

Exhibit 8 -15 Lags in Monetary Policy Copyright© 2008 South-Western, a part of Cengage

Exhibit 8 -16 Major Monetary Tools of Central Banks and Their Effect on the

Exhibit A 8 -1 Major Accounts in a Central Bank Balance Sheet Copyright© 2008

Exhibit A 8 -2 Composition of Industrialized Nations’ Central Bank Assets: 2002 Source: Richard

Exhibit A 8 -3 How Paper Currency Enters the Economy Copyright© 2008 South-Western, a

Exhibit A 8 -4 Cash Injections into the Economy Do Not Change the Monetary

U. S. Federal Reserve Note Copyright© 2008 South-Western, a part of Cengage Learning. All

Exhibit A 8 -5 Open Market Operations: Central Bank Purchases Securities from Banks Copyright©

Exhibit A 8 -6 Open Market Operations: Central Bank and Individuals or Companies as

Exhibit A 8 -7 Effects When ECB Buys Yen from European Banks Copyright© 2008

Exhibit A 8 -8 Effects When ECB Buys Yen from Japanese Banks Copyright© 2008

Exhibit A 8 -9 Effects When ECB Buys Yen from the Nonbank Public or

Exhibit A 8 -10 Effects of Discount Loans from the Central Bank Copyright© 2008

Exhibit A 8 -11 Structure of U. S. Banks and their Assets, June 30,

Exhibit A 8 -12 Structure of the Federal Reserve System Copyright© 2008 South-Western, a

Exhibit A 8 -13 Map of the Federal Reserve Districts Source: Board of Governors

Exhibit A 8 -14 Central Bank Independence versus Inflation Source: Alberto Alesina and Lawrence

Exhibit A 8 -15 Central Bank Independence versus Inflation Volatility Source: Alberto Alesina and

Exhibit A 8 -16 Central Banks around the World Copyright© 2008 South-Western, a part

Exhibit A 8 -16 Continued Copyright© 2008 South-Western, a part of Cengage Learning. All

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Exhibit 8 -10 Dominant Type of Open Market Operations and Securities that Central Banks Purchase Outright or Use for Repurchase Agreements: 2002 Source: Richard W. Kopcke, "The Practice of Banking in Other Industrialized Countries, ’’ New England Economic Review, Second Quarter 2002, 6. Also available online at http: //www. bos. frb. org/economic/neer 2002/neer 202 a. pdf (accessed September 11, 2006). *CG means central government. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit 8 -13 Standing Facilities at the Central Banks of Major Industrial Nations: 2002 Source: Richard W. Kopcke, ‘‘The Practice of Banking in Other Industrialized Countries, ’’ New England Economic Review, Second Quarter 2002, 6. Also available online at http: //www. bos. frb. org/economic/ neer/neer 2002/neer 202 a. pdf (accessed September 11, 2006). *MC means market ceiling. It is the rate the central bank charges on a fixed-term loan. MF means market floor. It is the deposit rate given on bank deposits at the central bank. Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit 8 -14 Stock Market Prices of Seven Blue Chip U. S. Companies, 1929 and 1932 Sources: AT&T Historic Stock Data, http: //www. att. com/ir/ (accessed June 5, 2006); The Wall Street Journal, ‘‘New York Stock Exchange Transactions, ’’ September 4, 1929, 32 (accessed through Pro. Quest, June 5, 2006); The Wall Street Journal, ‘‘New York Stock Exchange Transactions, ’’ December 31, 1932, 32 (accessed through Pro. Quest, June 5, 2006). Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit A 8 -2 Composition of Industrialized Nations’ Central Bank Assets: 2002 Source: Richard W. Kopcke, ‘‘The Practice of Banking in Other Industrialized Countries, ’’ New England Economic Review, Second Quarter 2002, 7. Also available online at http: //www. bos. frb. org/economic/ neer/neer 2002/neer 202 a. pdf (accessed September 11, 2006). Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit A 8 -11 Structure of U. S. Banks and their Assets, June 30, 2005 Source: Federal Financial Institutions Examination Council, ‘‘Assets, Liabilities, and Net Worth of U. S. Commercial Banks, Thrift Institutions and Credit Unions as of June 30, 2005, ’’ 2005 Annual Report, http: //www. ffiec. gov/PDF/annrpt 05. pdf, 21 (accessed September 11, 2006). Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit A 8 -13 Map of the Federal Reserve Districts Source: Board of Governors of the Federal Reserve System, Washington, D. C. , http: //www. federalreserve. gov/otherfrb. htm (accessed September 11, 2006). Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit A 8 -14 Central Bank Independence versus Inflation Source: Alberto Alesina and Lawrence H. Summers, ‘‘Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence, ’’ Journal of Money, Credit and Banking 25, no. 2 (May 1993). Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.

Exhibit A 8 -15 Central Bank Independence versus Inflation Volatility Source: Alberto Alesina and Lawrence H. Summers, ‘‘Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence, ’’ Journal of Money, Credit and Banking, 25, no. 2 (May 1993). Copyright© 2008 South-Western, a part of Cengage Learning. All rights reserved.