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Macro Economics Homework

Question # 00014724
Subject: Economics
Due on: 05/07/2014
Posted On: 05/07/2014 03:24 AM

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(1) Discuss the process of money creation by the commercial banks
(2) Suppose the central bank sells $5 billion worth of bonds to banks. Explain by using a balance sheets of a hypothetical bank, how this will lead to a contraction of the money supply.
(3) Explain in this context the statement that "an individual bank has little ability to expand the money supply unless all the other banks expand in step".
(4) Give a short critique of the model of the money creation process. How may banks behavior influence the money creation process?

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Macro Economics Homework

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Tutorial Preview …?Y x ?C x MPC That xxxxx with the xxxxxxxx in xxxxxxxxxxxx xxxxxxxxxx income xxxx increase This xxxxxxxx is the xxxxxxxxxx Spending xxxxxxxxxx x 1 x MPC Lower xxx MPC, higher xxx multiplier xxxxxx xxxxxxx MPC x 0 333 xxxxxxxxxx = 1/0 xxx = x xxxx means xx consumption is xxxxxxx by 1%, xxxxxxxxxx income xxxx xxxxxx by xx The magnitude xxx the same xxx increased xxxx xxxxxxx of xxx multiplier effect xxx Suppose the xxxxxxx bank xxxxx xx billion xxxxx of bonds xx banks Explain…
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