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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