Customers
·
When a customer deposits cash or withdraws
cash from their demand deposits account, it has No Effect on the Money Supply. It only changes the Composition of Money, RR, and ER.
·
Single Bank: Loan money from Excess
Reserves
·
Banking System: ER x Money Multiplier
FED
·
When the FED buys or sells bonds, ER is
created.
Money Market Graph
What happens to the money supply when the FED sells bonds? Is there a way to caculate the increase or decrease in money supply?
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