Chapter_16　The Fed, Money, and Credit多恩布什宏观经济学（）PPT教材课程.pptVIP

Chapter 16 The Fed, Money, and Credit Item Item Item Etc. McGraw-Hill/Irwin Macroeconomics, 10e ? 2008 The McGraw-Hill Companies, Inc., All Rights Reserved. Introduction In the recession of 2001, the Fed cut interest rates repeatedly (Figure 16-1) Questions: Should the Fed have cut interest rates more rapidly? Could the Fed have made M2 grow faster if it had wanted to? What does the Fed do to cut interest rates? [Insert Figure 16-1 here] In this chapter we will see what the Fed does, how they do it, and why they do it. Money Stock Determination The money supply consists mainly of deposits at banks ? Fed does not control directly A key concept concerning money in the U.S. is the fractional reserve banking system: banks required to keep only a fraction of all deposits on hand or on reserve (not loaned out) Compared to a 100% reserve banking system, where all deposits are kept on hand, and none is loaned out High powered money (monetary base) consists of currency and banks’ deposits at the Fed The part of the currency held by the public forms part of the money supply Currency in bank vaults and banks’ deposits at the Fed are used as reserves backing individual and business deposits at banks Fed’s control over the monetary base is the main route through which it determines the money supply Money Stock Determination The Fed has direct control over high powered money (H) Money supply (M) is linked to H via the money multiplier, mm ? Figure 16-2 shows this relationship: Top of figure is the money stock Bottom of figure is the stock of high-powered money = monetary base Money multiplier (mm) is the ratio of the stock of money to the stock of high powered money ? mm 1 The larger deposits are, as a fraction of M, the larger the multiplier [Insert Figure 16-2 here] Money Stock Determination Some observations of the money multiplier: The money multiplier is larger the smaller the reserve ratio, re The money multiplier is larger the smaller the currency-deposit ratio