- Required Reserves = Amount of Deposit x Required Reserve Ratio.
- Excess Reserves = Total Reserves - Required Reserves.
- Maximum amount a single bank can loan = the change in excess reserves caused by a deposit.
- The money multiplier = 1 / required reserve ration.
- Total Change in Loans = Amount single bank can lend x Money Multiplier.
- Total Change in the money supply = Total change in loans + $ Amount of Fed action.
- Total change in demand deposits = Total change in loans + Any cash deposited.
Wednesday, March 26, 2014
Important Formulas
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Wow! This is that first time I saw someone post something like this! It is so helpful to understand what to do for what type of problem. Thank you! I had a lot of confusion on what functions correlate with the wording of each problem until I read this break down. Now everything makes so much more sense~
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