Banks - Banks Banks assets money credit card balances and...

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Banks Banks assets: money, credit card balances and nominal government bonds. Banks liabilities: transactions deposits and time deposits. Essentially 2 separate businesses : 1. money and credit card balances match transactions deposits 2. Bonds match time deposits. Transactions Constraint for Consumers and Firms Group consumers and firms together and write the constraints they face. When the day starts C+F hold transaction deposits (M-)and time deposits (B-) carried over from the previous period. At the beginning of the day C+F are paid an interest R-on their balances B C+F can also pay for their purchases in the period using their credit cards. We denote the (nominal) amount charged to their cards by PXd. C+F can put money ( Bd) in time deposits (carried into the next period) Demand for Money Increasing in real income –more currency required as volume of transactions increases.
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