ECO209Y1 Lecture Notes - Lecture 10: Quantitative Easing, Prime Rate, Excess Reserves
Document Summary
Lecture 10: neo-keynesian view on money and banking. Depends on: central bank commercial bank public (comprised of firms and individuals) Nominal money supply = currency in hands of public + demand deposits. Affects supply, but supply is not completely determined by public. Is jointly determined by public and commercial banks. Commercial banks must lend money if public wants more. Agreement between public and commercial banks for loans to take place determines supply of money. Level of deposit also joint decision between public and commercial banks. Public has complete control over cup, partial control over d. Individuals can decide independently how much to hold in cup and d. Cash reserves = currency in vaults + deposits at central bank. In canada, cash reserve is at discretion of individual banks. Payments customers make by cheque or debit that are deposited in other banks. Can change d by lending more or less money. Stock of high-powered money or monetary base (b)
