MGEA06H3 Lecture Notes - Excess Reserves, Demand Deposit, Reserve Requirement

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MGEA06H3 Full Course Notes
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MGEA06H3 Full Course Notes
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Desired reserves = reserve ratio (rr) demand deposits (dd) Excess reserves = actual reserves held by chartered bank desired reserves. Excess reserves = - = : the chartered bank holds excess reserves of . Suppose the chartered bank keeps the level of excess reserves constant at and the central bank purchases of government bonds from the public (we called this open market purchase): Loans + ( ) = . Equity : the chartered bank"s reserves increases by , loans made by the chartered bank rises by , demand deposits increases by , money supply increases by , as demand deposits increases by . Fyi: how ms increases: when the central bank purchases of government bonds form the public, those who sell the bonds to the central bank will receive cheques form the central bank (a total amount of.

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