1. Determinants of the Money Supply
Chapter 16
Determinants of the Money Supply

2. MB = (r  D) + (e  D) + (c D) = (r + e + c)  D
Money Supply
M = m  MB
The Money Multiplier
R = RR + ER
RR = r  D
ER = e x D
R = (r  D) + (e x D)
Add C to both sides
R + C = (r  D) + (e x D) + C
MB = (r  D) + (e  D) + (c D)
= (r + e + c)  D
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3. Full Model: M = m  (MBn + DL)1
D =  MB
r + e + c
M = D + (c D ) = (1 + c) D
1 + c
M =  MB
m =
Full Model: M = m  (MBn + DL)
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4. Excess Reserves Ratio Determinants of e
1. i, opportunity cost of ER, ER , e
2. Expected deposit outflows, ER insurance worth more, e

5. Factors Determining Money Supply
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6. Deposits at Failed Banks: 1929–33
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7. Currency and Excess Reserves Ratios: 1929–33
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8. Money Supply and Monetary Base: 1929–33
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