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Unformatted text preview: 2-15-08Ch. 9-Money multiplieroMoney supply = currency (money) + deposit(institute)oMonetary base = currency + desired reservesoMonetary base * money multiplier = money supplyoDesired reserved ratio = (desired reserves) / (deposit)We call it boCurrency drain ration = (currency) / (deposit)We call it ab = (desired reserves) / (deposits) (deposits) * (b) = desired reservesa = (currency) / (deposits) a * deposits = currencyomoney supply = currency + deposits= (a) (deposit) + depositoMoney supply = (1+a)*depositoMonetary base = currency + desired reserves= (a) (deposit) + (b) (deposit)oMonetary base = (a+b) *depositoMonetary base x money multiplier = money supplier[(a+b) x deposit] x money multiplier = [(1 + a) x deposit]Money multiplier = [ (1 + a) / (a + b) ]ex. b = 0.1 a = .5 money multiplier = (1 + .5) / (.5 + .1) = 2.5monetary base = $2000money supply = 2.5 x $2000 = $ 5000-More we deposit greater money supplyEx....
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This note was uploaded on 12/02/2009 for the course ECON econ taught by Professor For got during the Spring '09 term at UCSD.
- Spring '09
- for got