The higher the net regulatory burden on fis the more

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Unformatted text preview: rom being regulated—such as insurance fund guarantees—and the private costs it faces from adhering to regulation—such as examinations—is called the net regulatory burden. The higher the net regulatory burden on FIs, the more inefficiently they produce any given set of financial services from a private (FI) owner’s perspective. Monetary Policy Regulation www.federalreserve.gov Outside Money The part of the money supply directly produced by the government or central bank, such as notes and coin. Inside Money The part of the money supply produced by the private banking system. Another motivation for regulation concerns the special role banks play in the transmission of monetary policy from the Federal Reserve (the central bank) to the rest of the economy. The problem is that the central bank directly controls only the quantity of notes and coin in the economy—called outside money—whereas the bulk of the money supply consists of deposits—called inside money. In theory, a central bank can vary th...
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