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Chapter 14 monetary property

Chapter 14 monetary property - reserves Excessive reserves...

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Chapter 14 monetary property Money creation is creation and destruction. When the Federal Reserve wants to they can change monetary policy. Fractional reserve system requires reserves and expansion of the system. 1 divided by .20 equals 5. That’s the money multiplier. When the multiplier goes down its tight money. When it goes up its easy money. For a single commercial bank they can only put out loans to the extent of their excess
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Unformatted text preview: reserves. Excessive reserves are the fed fund rate. When commercial banks make loans they create money. When loans are repaid money is destroyed unless they are immediately put back out. When commercial banks make loans they buy securities from the public because they are adding money to someone’s checking account. PG 247 requirements of types of deposits. No current requirement....
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