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Determinants of the Money Supply
The Economics of Money, Banking, and Financial Markets Mishkin, 7th ed. Chapter 16 Determinants of the Money Supply
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Money Multiplier: M = m × MB
Deriving Money Multiplier R = RR + ER RR: required reserves RR = r D ER: excess reserves R = (r D) + ER R: total reserves Adding C (currency) to both sides R + C = MB = (r D) + ER + C 1. Tells us amount of MB needed support D, ER and C 2. $1 of MB in ER, not support D or C MB = (r D) + (e D) + (c D) = (r + e + c) D
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Money Multiplier: M = m × MB
m < 1/r because no multiple expansion for currency and because as D ER Full Model M = m (MBn + DL)
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Excess Reserves Ratio Determinants of e
1. i , relative Re on ER (opportunity cost ), e 2. Expected deposit outflows, ER insurance worth more, e
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Factors Determining Money Supply
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Money Supply
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Determinants of the Money Supply
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Deposits at Failed Banks: 1929–33
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e, c: 1929–33
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Money Supply and Monetary Base: 1929–33
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