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Notes Monday, week 9

by: Marissa McKinney

Notes Monday, week 9 ECON 22061-001

Marissa McKinney
GPA 3.85
Principles of Macroeconomics
Dandan Liu (P)

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Week 9, Monday's notes!
Principles of Macroeconomics
Dandan Liu (P)
Class Notes
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This 2 page Class Notes was uploaded by Marissa McKinney on Monday October 26, 2015. The Class Notes belongs to ECON 22061-001 at Kent State University taught by Dandan Liu (P) in Summer 2015. Since its upload, it has received 19 views. For similar materials see Principles of Macroeconomics in Economcs at Kent State University.


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Date Created: 10/26/15
Monday 1026 FOMC Federal Open Market Committee Bank Reserves Fractional reserve system means they can only loan out a fraction of deposits In case you want to withdraw Reserves reservesdeposits Bank taccount From a private household point of view deposits are usually assets But from a commercial bank point of view deposits are liabilities Assets should equal liabilities Practice 3 gure out total reserve by subtract loan from deposit 10000 100002000005 B Practice 4 A Banks and the money supply an example Casel the money will remain the same amount as the original we will have the same 100 forever Case 2 the money supply still won t grow but now you will have no currency because it switched from currency to deposit Case3 Overtime after you deposit your 100 the bank can lend out some loans So your money will change hands Say someone borrows 90 out of your deposit So now the money supply is 190 You have 100 in deposits but there has also been 90 borrowed so you have to add up both deposits and borrows This system creates money but not wealth Created a 90 debt for borrower but increased money supply If borrower decides to put loan money in their own bank then that 90 can be borrowed out 81 max can be borrowed and this 81 now adds to the money supply again This process will continue on whenever you make a deposit you are helping the government create money Money multiplier Money multiplier is always 10 Turning 100 into 1000 Practice 5 1520 B Practice 6 C If 1 became 125 then 1000 becomes 12500 The feds 3 tools of monetary control The central bank cannot fully control the money supply but they have some tools 10pen Market Operation open market sale is selling bonds Increase money by buying bonds now there is more money available now the price of money goes down so essentially the interest rate will decrease Money becomes cheaper and easier to get 2


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