ECON 1BB3 Lecture Notes - Lecture 16: Reserve Requirement, Canadian Dollar, United States Dollar

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3

Document Summary

02/23/2016 (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) $ 96 875 = 3250+50k+25k+12. 5k+6. 25k. (actually money supply) If you kept going around the class it would have been 100k as the total. The amount is double the initial deposit, (multiplier effect) (adding 50%) Smaller the reserve ratio the bigger the multiplier. Eventually money in hands in the public will become 0. C= currency in the hands in the public. Rank assets from most to least liquid. bill doesn"t have intrinsic value because the cashier makes it have value. Legal tender means that people are more likely to accept the dollar as a medium of exchange: hyper inflation (zimbabwe example, legal value is with the companies. If the reserve ratio is 5% and a bank receives a new deposit of it will be able to make new loans up to a maximum of .