This preview shows page 1. Sign up to view the full content.
Unformatted text preview: M2 C. Money: How do banks create it? 1. Model: Money Supply = MB x money multiplier a. MB = Monetary Base = bank reserves + currency in circulation 2. Multiple Deposit Creation: A fairy tale 3. Conclusions a. More deposits, more loans, greater money supply b. Fewer deposits, fewer loan, lower money supply III. NEXT TIME (Monday, 25 April) A. Finish Chapter 30: The Financial Sector and the Economy B. Begin Chapter 31: Monetary Policy...
View Full Document
- Spring '07