ECON 351 Chapter Notes - Chapter 14: United States Treasury Security, Monetary Base, Bank Reserves

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21 Feb 2014
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Chapter 14: federal reserve"s balance sheet and money supply process. How money supply determined via three actors: federal reserve, banking system. Responsible for controlling money supply and regulating banking system. Create the checking accounts that are the most important component of m1 measures of the money supply which they wish to hold money for instance, as currency or as checking account balances. Refers to all households and firms other than banks and decides the form in: nonbank public. The monetary base - sum of bank reserves and currency in circulation. Monetary base = currency in circulation + reserves of banks: currency in circulation, vault cash, currency in m1. Currency in m1 = currency in circulation vault cash. Bank deposits with the fed plus vault cash: bank reserves. Monetary base = currency in m1 + total reserves of bank: required reserves, excess reserves. Reserves = required reserves + excess reserves. Reserves that the fed requires banks to hold.

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