lec06_03 - ECON 4721H Money and Banking Lecture 06_03...

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Unformatted text preview: ECON 4721H Money and Banking Lecture 06_03 Satoshi Tanaka University of Minnesota November 9, 2011 Satoshi Tanaka ECON 4721H Money and Banking Lecture 06_03 Economics of Banking III Banking with Reserve Requirements Satoshi Tanaka ECON 4721H Money and Banking Lecture 06_03 From Last Class Model with capital and money. Banking allows consumers to avoid holding money. When banking is a possibility, consumers make deposits instead of holding at money. Bank deposits are a form of inside money. Satoshi Tanaka ECON 4721H Money and Banking Lecture 06_03 Today's Question No one holds at money? That's not true in the real world. De nition (Reserve requirements) A bank must keep a certain fraction of its deposits in the form of at money. Recall what a bank did: take deposits and lend them out by making investments in capital. Reserve requirement states that a bank must not lend out a certain minimum fraction of all the deposits it receives, but keep it in the form of money....
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This note was uploaded on 02/07/2012 for the course ECON 4721H taught by Professor Tanaka during the Fall '11 term at Minnesota.

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lec06_03 - ECON 4721H Money and Banking Lecture 06_03...

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