Unit 4 - Mar 19

	Expansionary	Contractionary
OMO	Buys Bonds	Sell Bonds
Discount Rate	Decrease	Increase
Federal Fund Rate	Decrease	Increase
Required Reserves Ratio	Decrease	Increase

• Single Bank - amount of money single bank can create (loan out) = ER
• AR - RR = ER 
• $1000 - $100 = $900

• Banking System - can create money by a multiple of its initial ER 
• Deposit Multiplier = 1 / RR = 1 /.1 = 10

• System New Money = Deposit Multiplier X Initial ER
•   10 X 900 = $9000 

• Total change in Money Supply as a result of the deposit 
• Initial deposit (if new) + Banking system created money
• $1000 + $9000 = $10,000