Class Notes (835,600)
Economics (1,617)
ECON 1BB3 (535)
Lecture 17

# Lecture 17.docx

2 Pages
78 Views

School
Department
Economics
Course
ECON 1BB3
Professor
Hannah Holmes
Semester
Winter

Description
Lecture 17 Demonstration • This classroom is a closed economy. I have \$50,000 in currency and there is no banking system. • What is the current money supply? M = C + D = \$50,000 + \$0 = \$50,000 100% reserve banking system: M = C + D = \$0 + \$50,000 = \$50,000 • Now, I deposit my \$50,000 into a bank. The reserve ratio is 50% • What is the current money supply? M = C + D = \$3125 + \$50,000 + \$25,000 + \$12,500 + \$6,250 = \$96,875 Money Multiplier • Money multiplier: the amount of deposits the banking system generates with each dollar of reserves Money multiplier = 1 / reserve ratio Example Suppose the reserve ratio is 5%. If \$100 is deposited into the
More Less

Related notes for ECON 1BB3
Me

OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Just a few more details

So we can recommend you notes for your school.