Section15 - UNIVERSITY OF CALIFORNIA, BERKELEY Dorian...

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Unformatted text preview: UNIVERSITY OF CALIFORNIA, BERKELEY Dorian Carloni Department of Economics ECON 100B, Fall 2011 SECTION 15: The Money Supply Process 15.1. The Feds Balance Sheet Assets: & Assets and Liabilities 1. Assets: { Government securities: acquired through open market operations { Discount loans to depository institutions: banks borrowings from the central bank or bor- rowed reserves. Borrowing rate is call the discount rate. 2. Liabilities: { Currency in circulation: held by the non-bank public { Reserves: bank reserves held at the central bank (required reserves) and vault cash (excess reserves) & A central bank \creates" money by changing the monetary base (also called high-powered money) 15.2 Control of the Monetary Base & The monetary base, MB , equals { Currency in circulation, C (also called "desired money holdings"), plus { Reserves in the banking system, R , which are a&ected by: a. The Feds open-market operations = > change in reserves and in the monetary base b. The publics money asset mix = > change in reserves but not in the monetary base c. Bank borrowings from the Fed = > change in reserves and in the monetary base & The monetary base has two components: 1. Nonborrowed monetary base,1....
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Section15 - UNIVERSITY OF CALIFORNIA, BERKELEY Dorian...

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