Thursday, April 7, 2016

UnitI V (withdrawals and banking system)

  • When a customer deposits cash or withdraws cash from their demand deposit, it has NO EFFECT on MONEY SUPPLY 
* It only changes
1. The composition of money
2. Excess reserves
3. Required reserves 

  • Single bank (Chase) 
- can only loan money from excess reserves 

  • Banking system (Chase, Wells Fargo, BOA, Fidelity)  
- ER x Multiplier (also equals total money supply) 
FED- When the FED buys or sells bonds, ED is created 
200 x Multiplier 
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2 comments:

  1. Lisa WApril 8, 2016 at 5:08 AM

    Tracy you are missing you're fiscal notes I believe but amazing blog.

    ReplyDelete
  2. Ruth U.April 8, 2016 at 12:45 PM

    The loanable funds are the excess reserves and they increase when people deposit money into the bank. More cash deposits = more loans

    ReplyDelete

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