The Monetary System：货币制度.pptVIP

When one bank loans money, that money is generally deposited into another bank. This creates more deposits and more reserves to be lent out. When a bank makes a loan from its reserves, the money supply increases. How much money is eventually created in this economy? The money multiplier is the amount of money the banking system generates with each dollar of reserves. Assets Liabilities First National Bank Reserves $10.00 Loans $90.00 Deposits $100.00 Total Assets $100.00 Total Liabilities $100.00 Assets Liabilities Second National Bank Reserves $9.00 Loans $81.00 Deposits $90.00 Total Assets $90.00 Total Liabilities $90.00 Money Supply = $190.00! The money multiplier is the reciprocal of the reserve ratio: M = 1/R With a reserve requirement, R = 20% or 1/5, The multiplier is 5. The Fed has three tools in its monetary toolbox: Open-market operations Changing the reserve requirement Changing the discount rate Open-Market Operations The Fed conducts open-market operations when it buys government bonds from or sells government bonds to the public: When the Fed buys government bonds, the money supply increases. The money supply decreases when the Fed sells government bonds. Reserve Requirements The Fed also influences the money supply with reserve requirements. Reserve requirements are regulations on the minimum amount of reserves that banks must hold against deposits. Changing the Reserve Requirement The reserve requirement is the amount (%) of a bank’s total reserves that may not be loaned out. Increasing the reserve requirement decreases the money supply. Decreasing the reserve requirement increases the money supply. Changing the Discount Rate The discount rate is the interest rate the Fed charges banks for loans. Increasing the discount rate decreases the money supply. Decreasing the discount rate increases the money supply. The Fed’s control of the money supply is not precise. The Fed must wrestle with two problems that arise due to fractional-