When a customer deposits cash or withdrawals cash from their demand deposit account, it has no effect on money supply. It only changes:
1. The composition of money
2. Excess reserves
3. Required reserves
Single Bank
· Loan from your excess reserves. (ER)
Banking system
• Money increases by the multiple in the change of ER; ER * multiplier.
FED
When the FED buys or sells bonds, ER is created. # bought/sold * multiplier
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