ECON 2002.01 Lecture Notes - Lecture 18: Fractional-Reserve Banking, Excess Reserves, Reserve Requirement
8 Mar 2019
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17
ECON 2002.01 Lecture Notes - Lecture 17: Money Market Account, Money Market Fund, Savings Account
18
ECON 2002.01 Lecture Notes - Lecture 18: Fractional-Reserve Banking, Excess Reserves, Reserve Requirement
21
ECON 2002.01 Lecture Notes - Lecture 21: Federal Funds Rate, Dual Mandate, United States Treasury Security
Document Summary
Review on the shifters of the three curves. Ad = c + i + g + nx (impacts one of these, ad changes) Changes in taxes or transfer payments (like welfare, social security) Changes in interest rates, exchange rates, relative growth rates. M1 = currency + checking account deposits + travelers" cheques. M2 = m1 +saving account deposits + several other small less liquid forms of money. Find ,000 in couch and take it to the bank and put it in savings. Effect on m1: decreases (had currency 1,000) Effect on m2: stays the same (m1 transfers to savings) Required reserve ratio of 10% (this is an example) ,000 deposit (a liability because the bank eventually has to pay it back) is loaned out and sent into bank. Shows how much checking account deposits will increase (including initial deposit) based on initial increase in reserves. Change in reserves * 1/(required reserve ratio) = change in checking account deposits.
