LectureNote11

LectureNote11 - LECTURE ELEVEN Deposit Creation and the Money Supply Process ECONOMICS 209 Professor Kevin Huang Vanderbilt University Multiple

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LECTURE ELEVEN Deposit Creation and the Money Supply Process ECONOMICS 209 Professor Kevin Huang Vanderbilt University
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13-1 Multiple Deposit Creation and the Money Supply Process: Key Players Central Bank (FED) Depository Institutions (and other financial intermediaries) Depositors (individuals and institutions) Borrowers (individuals and institutions)
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13-2 FED’s Balance Sheet Monetary Liabilities ± Currency in circulation—cash in the hands of the public ± Reserves—bank deposits at the FED and vault cash Assets ± Government securities—holdings by the FED that affect money supply and earn interest ± Discount loans—lend reserves to banks and earn the discount rate Federal Reserve System Assets Liabilities Government securities Currency in circulation Discount loans Reserves
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13-3 Monetary Base High-powered money = + = currency in circulation = total reserves in the banking system MB C R C R
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13-4 FED Controls the Monetary Base Through its purchase or sale of securities in the open market (Open Market Operation) Through its extension of discount loans to banks
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13-5 Open Market Purchase from a Bank
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This note was uploaded on 04/07/2008 for the course ECON 209 taught by Professor Professor during the Spring '08 term at Vanderbilt.

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LectureNote11 - LECTURE ELEVEN Deposit Creation and the Money Supply Process ECONOMICS 209 Professor Kevin Huang Vanderbilt University Multiple

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