Read the Bank of England article "Money Creation in Modern Economy" and answer the following questions.
Question: Britain, Switzerland and most other countries in the world currently use the fractional reserve banking system. The Swiss National Bank (SNB) says that this system is a 'decentralised, two-tier' system, compared to the full reserve (or 100% reserve) banking system proposed by the Swiss Vollgeld Initiative (VGI). Explain how fractional reserve banking is a decentralized two-tier system. Use references.
Question: Contrast how monetary policy would be conducted under the Swiss Vollgeld Initiative (VGI) versus a fractional reserve banking system. Use references.
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