Change in Quantity of Money = Money Multiplier x Change in Monetary Base
Required Reserve Ratio, R
Currency Drain, C
Monetary Base, MB
Quantity of Money, M
Required reserve = R x Deposits
Currency = C x Deposits
Since MB is the sum of required reserves and currency,
MB = (R + C) x Deposits
M = (1 + C) x Deposits
Thus,
M = (1 + C)/(R + C) x MB !
M = (1 + C)/(R + C) x MB !
1 comment:
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