the equation for reserves and deposits is
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R=thetaD
theta is (R/D)
discount rate
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what the central bank charges on a loan to a commercial bank
bonds pay
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a positive interest rate, cannot directly be used for transactions
the central bank uses what tools to influence the money supply?
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CHOMP-- CHanging reserve requirement, Open market operations (buying
and selling bonds), Making loans to commercial banks at discount rates,
Paying interest on reserves
if the central bank buys bonds,
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with newly "printed" money (money out of thin air), money supply
INCREASES, bond prices rise, and interest rates fall. this is expansionary
policy
new deposits > withdrawals, then reserves...
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rise
Give this one a try later!
R=thetaD
theta is (R/D)
discount rate
Give this one a try later!
what the central bank charges on a loan to a commercial bank
bonds pay
, Give this one a try later!
a positive interest rate, cannot directly be used for transactions
the central bank uses what tools to influence the money supply?
Give this one a try later!
CHOMP-- CHanging reserve requirement, Open market operations (buying
and selling bonds), Making loans to commercial banks at discount rates,
Paying interest on reserves
if the central bank buys bonds,
Give this one a try later!
with newly "printed" money (money out of thin air), money supply
INCREASES, bond prices rise, and interest rates fall. this is expansionary
policy
new deposits > withdrawals, then reserves...
Give this one a try later!
rise
