Lesson+14--Money+Supply+Process

Lesson+14--Money+Supply+Process - Lesson 14: Money Supply...

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Unformatted text preview: Lesson 14: Money Supply Process M&B Chapters 16 Modern Money Mechanics, Federal Reserve Bank of Chicago, 1994out of print, but available here: http://www.bibliotecapleyades.net/archivos_pdf/money_mechanics.pdf Agents in the Money Supply Process Federal Reserve System Banks (depository institutions; financial intermediaries) Depositors (individuals and institutions) Borrowers (individuals and institutions) Simplified Federal Reserve Balance Sheet Fe de ra l Re se rve asset s liab ilt ie s Securities Bank Reserves (system open market account, SOM A) Currency in Circulation Discount Window Loans Other Liabilities & Capital Other Assets Monetary Base: Sometimes Called High-Powered Money Monetary Base = Reserves + Currency Changing Composition of the Monetary Base Composition of Monetary Base 2 0 0 0 0 0 4 0 0 0 0 0 6 0 0 0 0 0 8 0 0 0 0 0 10 0 0 0 0 0 12 0 0 0 0 0 14 0 0 0 0 0 16 0 0 0 0 0 18 0 0 0 0 0 2 0 0 0 0 0 0 Bank Reserves Currency Fed Sells Securities To Merrill Lynch Decreasing Bank Reserves Federal Reserve Merrill Lynch asset s liabilt ies asset s liabilt ies + $1 bln Securities- $1 bln Securities- $1 bln Reserves- $1 bln Deposit Citibank asset s liabilt ies- $1 bln Reserves- $1 bln Merrill Deposit Fed Buys Securities From Merrill Lynch Increasing Bank Reserves Federal Reserve Merrill Lynch asset s liabilt ies asset s liabilt ies- $1 bln Securities + $1 bln Securities + $1 bln Reserves + $1 bln Deposit Citibank asset s liabilt ies + $1 bln Reserves + $1 bln Merrill Deposit Open Market Operations: Summary...
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This note was uploaded on 03/23/2011 for the course ECONOMICS 220 taught by Professor Clare during the Spring '08 term at Rutgers.

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Lesson+14--Money+Supply+Process - Lesson 14: Money Supply...

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