Determinants Of The Money Supply374

Preview 374

The Money Supply Model and the Money Multiplier 375

Deriving the Money Multiplier 375

Intuition Behind the Money Multiplier 377

Factors that Determine the Money Multiplier 378

Changes in the Required Reserve Ratio r 378

Changes in the Currency Ratio c 379

Changes in the Excess Reserves Ratio e 379

Additional Factors That Determine the Money Supply 381

Changes in the Nonborrowed Monetary Base MBn 382

Changes in the Discount Loans DL from the Fed 382

Overview of the Money Supply Process 383

Application Explaining Movements in the Money Supply, 1980-2002 384

Application The Great Depression Bank Panics, 1930-1933 387

Summary, Key Terms, Questions and Problems, and Web Exercises 390

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