TAILIEUCHUNG - Ebook The economics of money, banking, and financial markets (7th edition): Part 2
(BQ) Part 2 book "The economics of money, banking, and financial markets" has contents: Multiple deposit creation and the money supply process, determinants of the money supply, tools of monetary policy, tools of monetary policy, the international financial system, the demand for money,.and other contents. | Ch a p ter 15 PREVIEW Multiple Deposit Creation and the Money Supply Process As we saw in Chapter 5 and will see in later chapters on monetary theory, movements in the money supply affect interest rates and the overall health of the economy and thus affect us all. Because of its far-reaching effects on economic activity, it is important to understand how the money supply is determined. Who controls it? What causes it to change? How might control of it be improved? In this and subsequent chapters, we answer these questions by providing a detailed description of the money supply process, the mechanism that determines the level of the money supply. Because deposits at banks are by far the largest component of the money supply, understanding how these deposits are created is the first step in understanding the money supply process. This chapter provides an overview of how the banking system creates deposits, and describes the basic principles of the money supply, needed to understand later chapters. Four Players in the Money Supply Process The “cast of characters” in the money supply story is as follows: 1. The central bank—the government agency that oversees the banking system and is responsible for the conduct of monetary policy; in the United States, it is called the Federal Reserve System 2. Banks (depository institutions)—the financial intermediaries that accept deposits from individuals and institutions and make loans: commercial banks, savings and loan associations, mutual savings banks, and credit unions 3. Depositors—individuals and institutions that hold deposits in banks 4. Borrowers from banks—individuals and institutions that borrow from the depository institutions and institutions that issue bonds that are purchased by the depository institutions Of the four players, the central bank—the Federal Reserve System—is the most important. The Fed’s conduct of monetary policy involves actions that affect its balance sheet (holdings of assets and .
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