Suche senden
Hochladen
Ma ch 14 banking and the money supply (1)
•
Als PPTX, PDF herunterladen
•
2 gefällt mir
•
1,475 views
U
Uconn Stamford
Folgen
Melden
Teilen
Melden
Teilen
1 von 48
Jetzt herunterladen
Empfohlen
Ch17
Ch17
Jim Lee
Ch21
Ch21
Jim Lee
Chapter 5-101118021837-phpapp01
Chapter 5-101118021837-phpapp01
University of Johannesburg
Metro, A Presentation of Production Management
Metro, A Presentation of Production Management
Muti ur Rahman Khan Lodhi
Money measuring
Money measuring
Jawad Ahmed
Money supply
Money supply
Saurabh Agarwal
The myth of sisyphus
The myth of sisyphus
ginish9841502661
2. money and banking
2. money and banking
Amaan Hussain
Empfohlen
Ch17
Ch17
Jim Lee
Ch21
Ch21
Jim Lee
Chapter 5-101118021837-phpapp01
Chapter 5-101118021837-phpapp01
University of Johannesburg
Metro, A Presentation of Production Management
Metro, A Presentation of Production Management
Muti ur Rahman Khan Lodhi
Money measuring
Money measuring
Jawad Ahmed
Money supply
Money supply
Saurabh Agarwal
The myth of sisyphus
The myth of sisyphus
ginish9841502661
2. money and banking
2. money and banking
Amaan Hussain
Central bank and state bank of pakistan, Functions, Prudential regulation
Central bank and state bank of pakistan, Functions, Prudential regulation
Hijratullah Tahir
Why Do Men Commit Suicide More Than Women?
Why Do Men Commit Suicide More Than Women?
Peter Orszag
ECONOMICS Chapter 5
ECONOMICS Chapter 5
saransuriyan
Remittance to pakistan
Remittance to pakistan
worldfx
Poverty in Pakistan by Javed Choudhry
Poverty in Pakistan by Javed Choudhry
ijaved59
Monetary System Of Pakistan
Monetary System Of Pakistan
Syed Hasnain Ahmed
Impact of money & quasi money on the economy of Pakistan
Impact of money & quasi money on the economy of Pakistan
samramalik92
State Bank of Pakidtan-Monetary Policy
State Bank of Pakidtan-Monetary Policy
Salma Bashir
Ch 13 money and the financial system macro econ4
Ch 13 money and the financial system macro econ4
telliott876
Ma ch 01 the art and science of economic analysis
Ma ch 01 the art and science of economic analysis
Uconn Stamford
Chapter 13 pp notes
Chapter 13 pp notes
Uconn Stamford
Ma ch 03 economic decision makers (1)
Ma ch 03 economic decision makers (1)
Uconn Stamford
Interactive Ch 16 The Monetary System 9e(1).pptx
Interactive Ch 16 The Monetary System 9e(1).pptx
MayaAwar1
Ma ch 02 economic tools and economic systems
Ma ch 02 economic tools and economic systems
Uconn Stamford
Ma ch 09 aggregate expend aggregate demand
Ma ch 09 aggregate expend aggregate demand
Uconn Stamford
Lecture%206.pptx
Lecture%206.pptx
TeyKaiyun
Ma ch 13 money and the financial system
Ma ch 13 money and the financial system
Uconn Stamford
Ma ch 13 money and the financial system (1)
Ma ch 13 money and the financial system (1)
Uconn Stamford
Lecture 10.pptx
Lecture 10.pptx
TeyKaiyun
Mi_Ch_1_Ten_Principles_of_Economics (1).ppt
Mi_Ch_1_Ten_Principles_of_Economics (1).ppt
sadiqfarhan2
Ma ch 04 demand supply and markets
Ma ch 04 demand supply and markets
Uconn Stamford
Ma ch 08 productivity and growth
Ma ch 08 productivity and growth
Uconn Stamford
Weitere ähnliche Inhalte
Andere mochten auch
Central bank and state bank of pakistan, Functions, Prudential regulation
Central bank and state bank of pakistan, Functions, Prudential regulation
Hijratullah Tahir
Why Do Men Commit Suicide More Than Women?
Why Do Men Commit Suicide More Than Women?
Peter Orszag
ECONOMICS Chapter 5
ECONOMICS Chapter 5
saransuriyan
Remittance to pakistan
Remittance to pakistan
worldfx
Poverty in Pakistan by Javed Choudhry
Poverty in Pakistan by Javed Choudhry
ijaved59
Monetary System Of Pakistan
Monetary System Of Pakistan
Syed Hasnain Ahmed
Impact of money & quasi money on the economy of Pakistan
Impact of money & quasi money on the economy of Pakistan
samramalik92
State Bank of Pakidtan-Monetary Policy
State Bank of Pakidtan-Monetary Policy
Salma Bashir
Andere mochten auch
(8)
Central bank and state bank of pakistan, Functions, Prudential regulation
Central bank and state bank of pakistan, Functions, Prudential regulation
Why Do Men Commit Suicide More Than Women?
Why Do Men Commit Suicide More Than Women?
ECONOMICS Chapter 5
ECONOMICS Chapter 5
Remittance to pakistan
Remittance to pakistan
Poverty in Pakistan by Javed Choudhry
Poverty in Pakistan by Javed Choudhry
Monetary System Of Pakistan
Monetary System Of Pakistan
Impact of money & quasi money on the economy of Pakistan
Impact of money & quasi money on the economy of Pakistan
State Bank of Pakidtan-Monetary Policy
State Bank of Pakidtan-Monetary Policy
Ähnlich wie Ma ch 14 banking and the money supply (1)
Ch 13 money and the financial system macro econ4
Ch 13 money and the financial system macro econ4
telliott876
Ma ch 01 the art and science of economic analysis
Ma ch 01 the art and science of economic analysis
Uconn Stamford
Chapter 13 pp notes
Chapter 13 pp notes
Uconn Stamford
Ma ch 03 economic decision makers (1)
Ma ch 03 economic decision makers (1)
Uconn Stamford
Interactive Ch 16 The Monetary System 9e(1).pptx
Interactive Ch 16 The Monetary System 9e(1).pptx
MayaAwar1
Ma ch 02 economic tools and economic systems
Ma ch 02 economic tools and economic systems
Uconn Stamford
Ma ch 09 aggregate expend aggregate demand
Ma ch 09 aggregate expend aggregate demand
Uconn Stamford
Lecture%206.pptx
Lecture%206.pptx
TeyKaiyun
Ma ch 13 money and the financial system
Ma ch 13 money and the financial system
Uconn Stamford
Ma ch 13 money and the financial system (1)
Ma ch 13 money and the financial system (1)
Uconn Stamford
Lecture 10.pptx
Lecture 10.pptx
TeyKaiyun
Mi_Ch_1_Ten_Principles_of_Economics (1).ppt
Mi_Ch_1_Ten_Principles_of_Economics (1).ppt
sadiqfarhan2
Ma ch 04 demand supply and markets
Ma ch 04 demand supply and markets
Uconn Stamford
Ma ch 08 productivity and growth
Ma ch 08 productivity and growth
Uconn Stamford
Elet5e ch15
Elet5e ch15
DeAnna Gossett
Ähnlich wie Ma ch 14 banking and the money supply (1)
(15)
Ch 13 money and the financial system macro econ4
Ch 13 money and the financial system macro econ4
Ma ch 01 the art and science of economic analysis
Ma ch 01 the art and science of economic analysis
Chapter 13 pp notes
Chapter 13 pp notes
Ma ch 03 economic decision makers (1)
Ma ch 03 economic decision makers (1)
Interactive Ch 16 The Monetary System 9e(1).pptx
Interactive Ch 16 The Monetary System 9e(1).pptx
Ma ch 02 economic tools and economic systems
Ma ch 02 economic tools and economic systems
Ma ch 09 aggregate expend aggregate demand
Ma ch 09 aggregate expend aggregate demand
Lecture%206.pptx
Lecture%206.pptx
Ma ch 13 money and the financial system
Ma ch 13 money and the financial system
Ma ch 13 money and the financial system (1)
Ma ch 13 money and the financial system (1)
Lecture 10.pptx
Lecture 10.pptx
Mi_Ch_1_Ten_Principles_of_Economics (1).ppt
Mi_Ch_1_Ten_Principles_of_Economics (1).ppt
Ma ch 04 demand supply and markets
Ma ch 04 demand supply and markets
Ma ch 08 productivity and growth
Ma ch 08 productivity and growth
Elet5e ch15
Elet5e ch15
Mehr von Uconn Stamford
Chapter 11 (1)
Chapter 11 (1)
Uconn Stamford
Ch17 lecture0
Ch17 lecture0
Uconn Stamford
Schaefer c14 (1)
Schaefer c14 (1)
Uconn Stamford
Schaefer c11 (1)
Schaefer c11 (1)
Uconn Stamford
Schaefer c10(1)
Schaefer c10(1)
Uconn Stamford
Schaefer c4
Schaefer c4
Uconn Stamford
Ch04 lecture (2)
Ch04 lecture (2)
Uconn Stamford
Schaefer c9 (1)
Schaefer c9 (1)
Uconn Stamford
Schaefer c10 (1)
Schaefer c10 (1)
Uconn Stamford
Ch13 prs
Ch13 prs
Uconn Stamford
Ch12 prs
Ch12 prs
Uconn Stamford
Ch13 lecture0 (1)
Ch13 lecture0 (1)
Uconn Stamford
Ch12 lecture0 (8)
Ch12 lecture0 (8)
Uconn Stamford
Ma ch 11 fiscal policy (1)
Ma ch 11 fiscal policy (1)
Uconn Stamford
Ch07 prs0
Ch07 prs0
Uconn Stamford
Ch08 prs0
Ch08 prs0
Uconn Stamford
Foreign born population profile
Foreign born population profile
Uconn Stamford
Ch12 lecture0 (4)
Ch12 lecture0 (4)
Uconn Stamford
Ch13 lecture0
Ch13 lecture0
Uconn Stamford
Ch04 lecture (1)
Ch04 lecture (1)
Uconn Stamford
Mehr von Uconn Stamford
(20)
Chapter 11 (1)
Chapter 11 (1)
Ch17 lecture0
Ch17 lecture0
Schaefer c14 (1)
Schaefer c14 (1)
Schaefer c11 (1)
Schaefer c11 (1)
Schaefer c10(1)
Schaefer c10(1)
Schaefer c4
Schaefer c4
Ch04 lecture (2)
Ch04 lecture (2)
Schaefer c9 (1)
Schaefer c9 (1)
Schaefer c10 (1)
Schaefer c10 (1)
Ch13 prs
Ch13 prs
Ch12 prs
Ch12 prs
Ch13 lecture0 (1)
Ch13 lecture0 (1)
Ch12 lecture0 (8)
Ch12 lecture0 (8)
Ma ch 11 fiscal policy (1)
Ma ch 11 fiscal policy (1)
Ch07 prs0
Ch07 prs0
Ch08 prs0
Ch08 prs0
Foreign born population profile
Foreign born population profile
Ch12 lecture0 (4)
Ch12 lecture0 (4)
Ch13 lecture0
Ch13 lecture0
Ch04 lecture (1)
Ch04 lecture (1)
Ma ch 14 banking and the money supply (1)
1.
Banking and the
Money Supply PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
2.
• How do
banks create money? • Why are banks called First Trust or Security National rather than Benny’s Bank or Loadsamoney? • How is the Fed both literally and figuratively a money machine? • Why are we so interested in banks, anyway? • After all, isn’t banking a business like any other, such as dry cleaning, auto washing, or home remodeling? • Why not devote a chapter to the home-remodeling business? © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2
3.
Money Aggregates •
Money aggregates –Measures of the economy’s money supply – Defined by the Fed • M1 = Narrow definition of money – Currency and coins held by nonbanking public –Checkable deposits – Traveler’s checks © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3
4.
Money Aggregates •
Checkable deposits –Bank deposits that allow the account owner to write checks to third parties – Debit cards can also access these deposits and transmit them electronically • Currency = Fiat money – Federal Reserve notes – Coins © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 4
5.
Money Aggregates •
Federal Reserve notes – US Bureau of Engraving and Printing – Issued by and Liabilities of the 12 Federal Reserve banks –Two-thirds circulate abroad • Coins –Manufactured by the U.S. Mint • Sells them to the Fed at face value © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 5
6.
Faking It •
The Supernote = Counterfeit $100 note –Began circulating in 1990 – Extremely high quality • Sequential numbers • Polymer security thread – Suspected origin: North Korea • Other counterfeit money – Using copy machines, printers, computers © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 6 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
7.
Faking It •
To help combat technological improvements in counterfeiting –Redesign every 7 to 15 years –Additional colors – 3-D security images, a security thread, and a bell that shifts inside a copper colored inkwell © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 7 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
8.
Faking It •
Most popular counterfeit –Domestic: $20 note – International: $100 note • Colombia – World’s largest source of bogus American currency © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 8 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
9.
Money Aggregates •
M2 = Broader definition of money –M1 – Savings deposits • Earn interest; no specific maturity date –Small-denomination time deposits • Certificates of deposits, CDs • Earn interest; specific maturity date –Money market mutual fund accounts • Restrictions © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 9
10.
Exhibit 1 Measures
of the Money Supply (Week of July 9, 2012) © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 10 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
11.
Money Aggregates •
Credit cards – Loan from the card issuer –Repay later – Dispute a charge – Not part of money supply • Debit cards – From checking account – Part of M1 © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 11
12.
Money Aggregates •
Paying for purchases – Debit cards – increasing – Checks – decreasing – Cash transactions – becoming less important – Credit cards – will continue to fund major purchases –Smartphones as debit cards – Online payments © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12
13.
Exhibit 2 Popularity
of U.S. Consumer Payment Systems: 2005 versus 2015 © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 13 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
14.
How Banks Work
• Banks earn profit – Attract deposits from savers – Lend to borrowers • Banks are financial intermediaries –Reduce transaction costs –Cope with asymmetric information –Reduce risk through diversification © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 14
15.
How Banks Work
• Asymmetric information – A situation in which one side of the market has more reliable information than the other side • Diversification – Develop a diversified portfolio of assets • Rather than lending funds to a single borrower –Reduce the risk to each individual saver © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 15
16.
Starting a Bank
• Home Bank – obtains a charter – Net worth = Owner’s equity • Shares of stock in the bank – Balance sheet • Assets = Liabilities + Net worth • Asset: owned by the bank – Physical property – Financial claim – Stock in district Fed • Liabilities: owed by the bank © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 16
17.
Exhibit 3 Home
Bank’s Balance Sheet © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 17 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
18.
Exhibit 4 Home
Bank’s Balance Sheet after $1,000,000 Deposit into Checking Account © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 18 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19.
Reserve Accounts •
Required reserve – Dollar amount that must be held in reserve –Required by Fed • Required reserve ratio – Percentage of checkable deposits (10%) • Must be held in reserve © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 19
20.
Reserve Accounts •
Reserves – Cash in bank’s vault –Deposits at the Fed • Excess reserves –Bank reserves exceeding required reserves –Can be used to make loans or to purchase interest-bearing assets © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 20
21.
Liquidity Versus Profitability
• Liquidity – Ease to convert assets into cash – Safety • Profitability – Hold more profitable assets • The objectives of liquidity and profitability are at odds © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 21
22.
Liquidity Versus Profitability
• Federal funds market –Day-to-day lending and borrowing –Among banks – Interbank market for reserves on account at the Fed – Interest rate: federal funds rate © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22
23.
Liquidity Versus Profitability
• Federal funds rate – Interest rate charged in the federal funds market – Interest rate banks charge one another for overnight borrowing – The Fed’s target interest rate © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23
24.
How Banks Create
Money • Creating money through excess reserves –Round one • Fed buys $1,000 US government bond – Creates reserves • Money supply: +$1,000 • Required reserves: +$100 • Excess reserves: +$900 © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 24
25.
Exhibit 5 Changes
in Home Bank’s Balance Sheet after the Fed Buys a $1,000 Bond from Securities Dealer © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 25 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
26.
How Banks Create
Money • Creating money through excess reserves –Round two • $900 loan • Money supply: +$900 • Required reserves: +$90 • Excess reserves: +$810 © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 26
27.
Exhibit 6 Changes
in Home Bank’s Balance Sheet after Lending $900 to You © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 27 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
28.
How Banks Create
Money • Creating money through excess reserves –Round three • $810 loan • Money supply: +$810 • Required reserves: +$81 • Excess reserves: +$729 © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 28
29.
Exhibit 7 Changes
in Merchants Trust’s Balance Sheet after Lending $810 to English Major © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 29 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
30.
How Banks Create
Money • Creating money through excess reserves –Round four and beyond • Excess reserves: new loans • Required reserves: +10% of new checkable deposits – Excess reserve: maximum amount for loans –Money supply expansion © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 30
31.
How Banks Create
Money • A summary of rounds – Fed: $1,000 injection in fresh reserves – Increased excess reserves –Money supply increase: up to $10,000 • Checkable deposits –Banking system • Eliminates excess reserves – Expand money supply © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 31
32.
Exhibit 8 Summary
of the Money Creation Resulting from the Fed’s Purchase of $1,000 U.S. Government Bond © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 32 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
33.
Reserve Requirements •
Assumptions – No bank holds excess reserves – Borrowed funds don’t sit idle – People don’t want to hold more cash • Change in the money supply = Change in fresh reserves ˣ 1/r –Required reserve ratio = r – Simple money multiplier = 1/r © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 33
34.
Reserve Requirements •
Money multiplier – The multiple by which the money supply changes • As a result of a change in fresh reserves in the banking system • Simple money multiplier, 1/r – Reciprocal of the required reserve ratio –Maximum multiple of fresh reserves by which the money supply can increase © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 34
35.
Reserve Requirements •
Excess reserves – Fuel the deposit expansion process – A higher reserve requirement • Drains this fuel from the banking system • Reducing the amount of new money that can be created © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 35
36.
Limitations of Money
Expansion • Leakages from expansion –Smaller money multiplier – Cash – preferred to checking accounts • People hold money • Fewer excess reserves © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 36
37.
Multiple Contraction •
The Fed sells a $1,000 bond –Money supply: -$1,000 –Required reserves: -$900 – Recall loans –Money supply: -$900 –Required reserves: -$810 –Maximum effect • Decrease money supply = Original decrease in reserve requirements ˣ 1/r © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 37
38.
The Fed’s Tools
of Monetary Control • Open-market operations – Buy / sell US government bonds • The discount rate – Interest rate, the Fed – For loans made to banks • The required reserve ratio – Minimum fraction of reserves © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 38
39.
Open-Market Operations •
Increase money supply – The Fed buys US bonds • Open-market purchase • Reduce money supply – The Fed sells US bonds • Open-market sale • Tool of choice for the Fed – Influences bank reserves – Influences federal funds rate © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 39
40.
The Discount Rate
• Discount rate – Interest rate charged by the Fed – Loans to banks • Bank borrow ‘Discount window’ – Satisfy reserve requirements • The Fed – Lender of last resort © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 40
41.
The Discount Rate
• Discount rates – Primary discount rate – Secondary discount rate • Signal to financial markets –Monetary policy • Emergency tool – Injecting liquidity © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 41
42.
Reserve Requirements •
Reserve requirements –Regulations regarding the minimum amount of reserves that banks must hold to back up deposits – Determine how much money the banking system can create with each dollar of fresh reserves • Disruptive to the banking system © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 42
43.
Coping with Financial
Crisis • Regulation of financial markets – Prevents major disruptions and financial panics – Sufficient liquidity in the financial system • 2007 and 2008 – Discount rate from 6.25% to 0.5% • Encouraged banks to borrow from the Fed © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 43
44.
Coping with Financial
Crisis • To help banks improve - balance sheets – Interest on bank reserves held at the Fed • To keep mortgage rates low – Invested more than a $1 trillion in mortgage-backed securities • Prevent the insurance giant AIG from collapsing – Invested more than $90 billion in the company © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 44
45.
The Fed is
a Money Machine • Assets (most earn interest) –Mortgage-baked securities (30%) – U.S. government securities (60%) • From open-market operations – Foreign currencies • Liabilities – Federal Reserve notes outstanding (40%) • U.S. currency – Reserves © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 45
46.
The Fed is
a Money Machine • The Fed is a money machine –Supplies Federal Reserve notes –Main assets: earns interest –Main liability: no interest payment – Earns revenue from discount lending to banks and from other services it provides banks © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 46
47.
The Fed is
a Money Machine • The Fed’s payments – Its operating costs – A small amount of interest on bank reserves at the Fed –6% dividend to the member banks – Any remaining income: to the federal government (U.S. Treasury) • $77 billion in 2011 © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 47
48.
Exhibit 9 Federal
Reserve Bank Balance Sheet as of July 11, 2012 (Billions) © 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as 48 permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Jetzt herunterladen