AP宏观经济学教程

AP宏观经济学教程MoneySupply(M1)=Currency+CheckableDeposits+Traveler’sChecksOutstanding$2,269.7Billion$1,048.6Billion$1,217.1Billion$4BillionAsofJuly13,2012M1WithComponentsCurrencyasPercentageofM1AsofJuly13,2012M2=$9,991.5BillionM1

$2,269.7Billion+SavingsDeposits$6,386.4Billion+Small-DenominationTimeDeposits$694.9Billion+MoneyMarketMutualFunds$640.5BillionM2MoneySupplyandGDPVelocity:Thenumberoftimesperyearthattheaveragedollarinthemoneysupplyisspentforfinalgoodsandservices.[Economics,McConnellBrueFlynn,19thedition,8-30]M1V=PQM1xVelocity=NominalGDPCurrentFiguresAsofJan1,2012V=PQ/M1=6.96VelocityofM1Marketfor“FederalFunds”FederalFundsRate:Rateatwhichbankschargeoneanotherforovernightloansmadefromexcessreserves.rt=nominalinterestratetargetforfederalfunds(0%-0.25%forJuly2012)$rnMSMDrtMarketfor“FederalFunds”MS=MoneySupplyessentiallysetbytheFederalReserveMD=MoneyDemandInfluences:TransactiondemandNominalGDPorIncome(+)Asset/SpeculativeDemandOpportunitycostofholdingmoney(-)

PrecautionaryDemandUnforeseenExpenses(+)$rnMSMDrtFederalFundsRateRealInterestRatesandInterest-SensitiveInvestmentandConsumptionrreal$DesiredExpenditureInvestmentsr0ε0r1ε1TheStructureofNominalInterestRatesRealInterestRate=RNominal–ExpectedInflationExle:15-YearMortgageRealInterestRate=3.17%–1.5%=1.67%AsofJuly2012Exle:Real30-YearMortgageRateBalanceSheet:BankABankAhasnoexcessreservesBalanceSheet:BankBBankBhas$50excessreservesRequiredReserveRatioBankreserves,requiredand/orexcess,mayeitherbeheldat:Thebank(vaultcash)TheregionalFederalReserveBankAModelofDepositCreationWhenacommercialbankreceivesacashdeposit,thebank’sabilitytoincreaseloansbeginsachainofnewloansthatcanleadtoamultipliedincreaseindemanddepositsandinthemoneysupply.Theextentofthemaximummultipliedincreaseisdirectlytiedtotherequiredreserveratio.AnExleAssumePersonAdeposits$1000ofcash,previouslyheldinherhome,inBankI.BankImustmaintain$100ofreservesagainstPersonA’sdeposit.ThisallowsBankItoloanout$900toPersonB.RequiredReserveRatio=10%AnExleNextPersonBtakestheloanandemploysacontractor,PersonC,tobuildadeckfor$900.BankImustmaintain$100ofreservesagainstPersonA’sdeposit.Thecontractor(PersonC)depositsthe$900intohisbank,BankII.BankIImustmaintain$90ofcashreservesagainstthisdepositof$900.ThisallowsBankIItoloanoutanadditional$810.RequiredReserveRatio=10%AnExleAssumeBankIIlends$810topersonDwhowishestohaveamedicalprocedure.PersonDpaysthephysician(PersonE)the$810;thephysiciandepositsthe$810inheraccountinBankIII.BankIIImustthenhold$81incashreservesallowingBankIIItolendout$729toPersonF.RequiredReserveRatio=10%AnExleThisprocesscontinueswiththefollowingendresult:RequiredReserveRatio=10%The$1,000innewreservesrepresentsthe$1,000cashdepositbyPersonA.Thesereservesarenowspreadacrossmanybanks.AnExleThedepositcreationmultiplierisequalto1/(RequiredReserveRatio).Inthisexlethismultiplierisequalto1/.10=10Themaximumfinalincreaseindemanddepositsis10timestheincreaseincashreservesof$1000.RequiredReserveRatio=10%ChangeintheMoneySupplySincetheMoneySupplyisthesumofcirculatingcashanddemanddeposits,inthiscasethemaximum

increaseinthemoneysupplyis$9,000.

Circulatingcashfallsby$1,000(PersonA’soriginaldepositofcashintoBankI)Whiledemanddepositsgrowby$10,000,foranetincreaseof$9,000LimitationstotheMaximumIncreaseBankskeepexcessreserves:BankIneednotincreaseloansbyafull$900,themaximumlegalincreaseinloans.Intheabsenceofsufficientlycredit-worthycustomers,forexle,BankImaykeepexcessreserves,loaningoutonly$700forexle,maintaining$200ofexcessreserves.LimitationstotheMaximumIncreaseLeakagetocoinandcurrency:Thecontractor(PersonC)waspaid$900.Ifinsteadofdepositingthefull$900inhisaccountatBankII,thecontractorkept$100incashandonlydeposited$800,thenBankIIwouldonlyhavebeenabletoincreaseitsloansby$720(90%of$800)insteadof$810(90%ofthefull$900.LimitationstotheMaximumIncreaseTime:Thisprocesstakesmanyiterationstoapproachitsfullimpact.Afterseveralmonths,onlyapartialmultipliedincreaseindemanddepositscanbeexpected.Exle2:UsingBankBalanceSheetBankI:The$1000depositbyPersonAgeneratesa$1000increaseincashreservesanda$1000increaseindemanddeposits.Exle2:UsingBankBalanceSheetBankI:BankImayloanout$900toPersonBtobuildthedeck.ThebankputstheproceedsoftheloanintoPersonB'scheckingaccountatBankI,sothatPersonBmaywriteachecktopaythecontractor.Exle2:UsingBankBalanceSheetBankI:Oncethecontractor(PersonC)cashesthecheck,PersonB'sdemanddepositsdecreaseby$900andthecashreservesdecreaseby$900,astheproceedsofthecheckaresenttoBankII,wherethecontractor(PersonC)depositsthecheck.Exle2:UsingBankBalanceSheetBankI:ThefinalchangeforBankIis:AnincreaseinDemandDepositsof(PersonA)of$1000,Anincreaseinloansof$900(PersonB),Anincreaseofcashreservesof$100.NotethatBankIiskeepingnewcashreservesof$100equalto10%ofthenewdemanddeposit,theamountconsistentwiththerequiredreserveratioof10%.OpenMarketOperation-Expansionaryr0r1M1Ms’$rnominalM0MsMDOpenMarketOperation-ExpansionarySPBond$DP1P0D’SecondaryMarketforBondsOpenMarketOperation-Expansionaryrreal$Investmentsrr0I0rr1I1OpenMarketOperation-ExpansionaryGoals:GDPrealwillIncreaseEmploymentwillIncreaseUnemploymentwillDecreaseOpenMarketOperation-Contractionaryr1r0M1Ms’M0Ms$rnominalMDOpenMarketOperation-ContractionarySPBond$DP0S’P1SecondaryMarketforBondsOpenMarketOperation-ContractionaryI1rr1rreal$Investmentsrr0I0OpenMarketOperation-ContractionaryGoal:PriceLevelwillDecreaseLeadsto:ExpansionaryMonetaryPolicyIncreasedMoneySupplyDecreasedInterestRatesIncreasedInvestmentIncreasedAggregateDemandIncreasedGDPIncreasedEmploymentDecreasedUnemploymentTraditionalToolsofExpansionaryMonetaryPolicyOpenMarketPurchaseofBondsbyFederalReserveLowerDiscountRateRateatwhichbanksmayborrowfromtheFederalReserveLowerRequiredReserveRatioToolsofExpansionaryMonetaryPolicyRecentlyEmployedTools:QuantitativeEasingPurchasingofvariousfinancialassetswithnewlycreatedmoney.OperationTwistLoweringoflong-terminterestratesbysellingshorter-termbondsandbuyinglonger-termbonds.Aimistoencouragelong-terminvestment.LimitstoMonetaryPolicyBankskeepingexcessreserves.Leakageoffundstocirculatingcurrency.Timelaginmakingnewloans,reducingimmediateeffectivenessInelasticityofinvestmentandotherinterest-rateexpenditures2012FreeResponse2012FreeResponseAnswer$10,000/$100,000=.10or10%

Reducedby$5,000None.Whiledemanddepositsfallby$5,000,circulatingcashincreasesby$5,000.Sincedemanddepositsarenow$95,000;$9,500mustbekeptascashreserves.Reservesarenow$10,000($15,000-$5,000).Sothevalueofexcessreservesis$500.ByborrowingfromotherbanksattheFederalFundsRateorfromtheFederalReserveatthediscountrate2011FreeResponse2011FreeResponseAnswer2010Fre