Macroeconomics

Running head: Macroeconomics
MACROECONOMICS
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1
Macroeconomics
Table of contents
Chapter22.pdf..................................................................................................................................2
APMacroWorksheet........................................................................................................................4
Reference list...................................................................................................................................9

2
Macroeconomics
Chapter22.pdf
1.
Reserve requirement is 10% or 0.10, the deposit is around 1,000,000,000, and the money
creation that is created will be around 0.1*1,000,000,000 = $100000000. Working of money
creation is through bank deposits and other cash deposits that are being made into central or any
other local banks. Most of the banks have to keep a certain point of deposit based on the deposit
ratio reserve ratio acts more like a multiplier that increases the money supply in the banks.
2.
M1, M2, M3 if plotted in vertical axis and time is one the horizontal axis will never cross
in the sense that these three variables are denoting three different things and they all influence
monetary position in the economy. Narrow Money (M1): M1 = Currency with public +
Demand deposits with the Banking system (current account, saving account) + Other deposits
with RBI. M2 = M1 + Savings deposits of post office savings banks and Broad Money (M3):
M3 = M1 + Time deposits with the banking system.
3.
The theory that has been discussed in this study is the monetary policy in the upgraded
version that is claiming the fact that money is not neutral in the end. On the other hand, the
supply of money is depending entirely on the Fed supply and prevalence of interest rate in the
economy. Moreover, taking the modern monetary condition in the economy is highlighted by the
development of resources and is totally depending on the reserve rate of central banks.

3
Macroeconomics