- Money Creation Formula:
- A single bank can create $ by amount of its ER
- banking system as a whole can create $ by a multiple of excess reserves
- MM X ER = Expansion of $
- Money multiplier= 1/RR
- New vs. Existing Money:
- Initial deposit in a bank comes from the FED/bank purchase of a bond or other $ out of circulation (buried treasure), the deposit immediately increases the $ supply
- The deposit then leads to further expansion of the money supply through the money creation process.
- New Money Formula:
- Total change in MS if the initial deposit is new money:
- Deposit + Money created by the banking system.
- Existing Currency deposited into a checking account will only change the composition of the money supply.
- Total change in MS if the initial deposit is existing money:
- Banking system created money only
Saturday, April 28, 2018
money creation
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An enlargement of the text would be great because the font is pretty small and the color background of white in some parts of the notes doesn't make it any better. I think you might be missing some few concepts as well such as the liability and assets balance sheet, banking systems and other.Also a great way to lighten things up with out using so much words is to include pictures,
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