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.
explain main features of short run engineering cost theory
Dynamic Changes in Costs: The Learning Curve
#questioIn many metropolitan areas of the country, local governments often impose rent controls on apartments. The justification for doing so is that the current market rent is con
Question (a) Describe clearly the three concepts of elasticity of demand. Use appropriate examples and diagrams to support your answer. (b) Consider you have been appointed
Determinants of Private Demand for Education Rates of return on investment in education is only one of the factors determining the demand for private investment though it is
Why firm charges different prices to different consumer? Every firm needs to maximize its profit. When goods are sold to different customers, each customer negotiate price of
Cost Sharing in Higher Education - Increasing the Fees A commonly suggested cost recovery method is to increase the fees charged for the courses in higher education. The share
Wealth Tax: A tax in that owners of specific forms of wealth (likereal estate, financial wealth, or inheritances) should pay a specified proportion of that wealth to government, us
Suppose scientists discover that eating soybeans prevents cancer and heart disease. What effect would you predict on the price of soybeans?
clarify the opportunity cost theory
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