The money supply process

6 important questions on The money supply process

What are the three players in the money supply process?

  • central banks
  • banks
  • depositors

Of what does the liabilities sheet exist? (monetary liabilities)

of currency in circulation and reserves. Together they form the monetary base

Of what does the asset sheet exist?

of securities and loans to financial institutions
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What are loans to financial institutions?

they provide reserves to banks and earn discount rate

What are primary dealers?

government securities dealers who operate out of private institutions

What is a simple deposit multiplier and how is it calculated?

the multiple increase in deposits generated an increase in the banking system's reserves.
change in checkable deposits in banking system = 1 / required reserve ratio x change in reserves for the banking system 

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