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The Money Multiplier is explained below:
If you see carefully, the money multiplier is nothing but an inverse of a reserve ratio. Therefore, we can write MM = 1/rr, where rr is the reserve ratio. Usually, in stock terms we can write down, M2 = MM*M0 = (1/rr)*M0; and in flow terms we can write, ΔM2 = (1/rr)*ΔM0. The higher the reserve ratio, the higher will be the leakage, so to speak, from money creation process and so the lower the money multiplier. In the extreme case, when rr = 100%, MM is 1, and M2 = M0.
To complete our understanding of money supply process let us now zoom in on central bank’s balance sheet. To keep things easy, we’ll consider the balance sheet of State Bank of Nepal, SBN, abstracting from more complicated ones held by the U.S. Federal Reserve Bank, the European Central Bank or the Bank of England. The choice of SBN is, however, for illustration purposes only and this does not reflect on SBN’s actual financials.
The Healthy Spring Water company sells bottled water for offices / homes. The price of the water is $20 per 10 gallon bottle and the company currently sells 2,000 bottles per day.
RATIONAL EXPECTATIONS AND ECONOMIC THEORY : Much of undergraduate macroeconomic theory is discussed on the assumption that, in the short run, the expectations of economic age
Ask question #Minimum 100 areanycurrentsubsidyorwelfareissueddiscussedoraddressedinparliamentwords accepted#
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