Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The Money Creation Process is explained below:
We can now study the money supply or the creation process. Suppose the government wishes to buy pencils worth Rs. 10 for the officials working for it. The supplier firm is called S and has the deposit account with Bank A. In order to buy the pencil, the government asks the central bank to print the 10 rupee note and give it to government.5 this action makes M0 to expand by Rs. 10. Now the government gives this amount to S (in exchange for the pencils) who in turn deposits the sum of money into his account in Bank A. What is the work of A? Assuming it operates the safety cushion or reserve ratio of 10%, A will add Re 1 to its liquidity reserve and then lend Rs 9 to the firm T. Firm T, takes the Rs 9 and deposits it in an another Bank B. B acts in the similar way: it adds 90 paisa (10% of Rs 9) to its existing liquidity reserve and lends the remaining amount which is Rs 8.1 to firm Z. The process goes carries on, the amount lent falling every time by the factor of 10%.
If the money creation process is made as an infinite series (starting from central bank printing ten rupee note), we will get 10 + 10*(90%) + 10*(90%)*(90%) + 10*(90%)*(90%)*(90%) + ……. which is an infinite converging series with the first term of 10 and a convergence factor of 0.9 (or 90%). The sum till infinity of this series is 10/(1-0.9) = 100. Therefore, an initial M0 expansion of Rs. 10 has a entire money supply (or M2) impact of Rs 100, thanks to the intermediation of the commercial banks. There is a money multiplier (MM) at action of magnitude 10.
Monopsony is single buyer of a commodity in the market. The MRP slopes downward in an imperfectly competitive (resource) market serving an not perfectly competitive product mar
V alue Additivity In an efficient market the value of any 2 assets can be estimated as the sum of the values of the two individual assets. This is a variation on the theme
discus how opportunity cost influence supplier''s decision to supply labour
Monopsony: Demonstrate (with a graph) how a minimum wage can increase both the wage and employment in a monopsony market even when the government sets th
what is the theory of supply
Cost Sharing in Higher Education - Graduate Tax Another commonly suggested measure is to tax the employers employing educated manpower. The case for this method is made on the
quasi rent theory
Private and Social Benefits Private benefits are those which accrue to an individual. They may be both monetary and non monetary, direct and indirect. Earnings of an individua
Economic Development The word development is from the Latin root ‘Voloper’ which meant wrap up, envelop. The English used this word along with ‘des’ meaning ‘undo’. The word
Various studies have concluded that the demand for movie cinema attendance is responsive to advertising. A study of one company, with movie cinemas in three neighbouring towns, sh
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd