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Econ310_Notes20101021

Econ310_Notes20101021 - MoneySupply&Multiplier 004...

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Econ 310- 004 Equations MB = C + R monetary base M = C + D M1 ΔD = (1/r) ΔR deposit multiplier R = RR + ER reserves M = mMB money multiplier c = C/D currency ratio e = ER/D excess reserves ratio D = (1/(r+e+c))MB deposits vs. monetary base m = (1 + c)/(r + e + c) money multiplier M = ((1 + c)/(r + e + c))MB money multiplier Variable definitions  money supply MB   monetary base  demand deposits in banking system  currency in circulation  reserves in banking system RR   required reserves in banking system ER   excess reserves in banking system deposit multiplier   1/r  money multiplier  required reserve ratio  ratio of currency to deposits  ratio of excess reserves to deposits Definitions required reserve ratio  – required percentage of liabilities banks must keep as reserves

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Econ310_Notes20101021 - MoneySupply&Multiplier 004...

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