Economics Chapter 4 Bank Credit and Monetary Policy.

Economics

Chapter 4

Bank Credit and Monetary Policy

Banks Central bank

Special functions in the economy Commercial banks

Profit making financial institutes

A B

Deposit Loan

Loan payment+

Interest payment

Deposit withdrawal+

Interest

Money Supply

M1 = Cash held by the public + Demand deposits in LBs

M2 = M1 + Savings and time deposits in LBs

+ NCD issued by LBs which held by the public

M3 = M2 + Deposits & NCD in RBs & DTCs

Money Supply Mr. A has $1,000 cash

Mr. A saves his $1,000 cash into saving deposit

The bank agrees to lend $1,000 to Mr. B (agreement made)

Mr. B cash out his loan $1,000 from the bank

Mr. B saves his $1,000 into the bank

MS = M1 = $1,000 (M1 = Cash = $1,000)

MS = M2 = $1,000 (M1 = Cash = $0) (M2 = M1 + Deposit in LB from

Mr. A= $1,000) MS = M2 = $1,000

Cash = $0 Mr. A’s deposit = $1,000

MS = M2 = $2,000 Cash = $1,000 Mr. A’s deposit = $1,000

MS = M2 = $2,000 Cash = $0 Mr. A & B’s deposit = $2,000

Deposit creation Through making saving and lending process

Bank gains from difference in interest Loan will lead to

Deposit Money supply (from $1,000 to $2,000 in above case)

The process is know as Deposit creation or Credit creation

The reserve system of banks In order to protect depositors, banks

Cannot lend out all the deposits Keep enough cash in case of withdrawal

Cash held by bank = Reserve (儲備 )

Reserve ratio = Reserve-to-deposit

Reserve ratio = x 100%

Calculation of reserve ratio Bank’s balance sheet

Cash: Assets held by the bank Deposits: Liabilities that the bank owes the depositors

Case 1 With cash reserves equals total deposits Reserve ratio = ($1000/$1000) x 100%

= 100%

Assets ($) Liabilities ($)

Cash reserves $1,000 Deposits $1,000

Calculation of reserve ratio

Case 2 The bank loan out $500 Cash reserves = $1,000-$500 = $500 Reserve ratio = ($500/$1000) x 100%

= 50%


Cash reserves($1,000-$500) $500Loans(+$500) $500

Deposits $1,000


Case 3 The bank loan out $1,000 Cash reserves = $1,000-$1,000 = $0 Reserve ratio = ($0/$1000) x 100%

= 0%


Cash reserves($1,000-$1,000) $0Loans(+$1,000) $1,000

Deposits $1,000


Try this: Given the deposit = $5,000 The bank loan out $3,000 Cash reserves = $5,000-$3,000 = $2,000 Reserve ratio = ($2,000/$5,000) x 100%

= 40%


Cash reserves($5,000-$3,000) $2,000Loans(+$3,000) $3,000

Deposits $5,000

The minimum reserve requirement

The Gov’t sets a lowest limit to the reserve ratio To protect public interests Maintain stability of the financial system

Required reserve ratio (RRR) orMinimum reserve ratio

In US, RRR=10%, i.e. for every $100 saving the bank must keep $10 for cash reserve and the bank can loan out $90 for profit marking

The fractional reserve system

Fractional reserve system

Banks are required to hold only a portion of their deposits as reserves.

No need to hold all the deposits as reserve.

Can be loaned out for making profit.

The fractional reserve system and RRR

Country RRR(%) Remarks

United Kingdom None

Canada None

Australia None

New Zealand None

Japan 0.77

Taiwan 7.00

United States 10.00 No reserve required on savings accounts since 1990

Brazil 20.00Up from 15%, effective from 2010-12-06 - Ratio is for requirement on term deposits.RRR for foreign currency positions increased to 43.00 on 15/6/2010

China 20.00Ratio is for major Chinese Banks on 2012-05-12;[18] down from a 21.5% high in June 2011.Small and medium-size banks have a lower rate of 18.50%.

Hong Kong None Liquidity ratio ≥ 25% (Banking Ordinance – Sect.102)

Member of EU (e.g. Greece, Germany, etc.)

Subject to minimum reserve framework of the Eurosystem(http://www.ecb.int/mopo/implement/mr/html/calc.en.html)

http://www.ecb.int/mopo/implement/mr/html/calc.en.html

Excess reserve Additional reserve apart from the required or Reserve hold by banks which is in excess of the required

reserve.

Excess reserve = Actual reserve – Required reserve

Example Given RRR = 20% and deposit = $1,000

Required reserve = $1,000 x 20% = $200If the bank hold reserve = $500Excess reserve = $500 - $200 = $300

This $300 excess reserve is not required to hold by the gov’t The bank decides to hold more in case of risk of cash withdrawal However, maximum loan drops from $800 to $500

Excess reserve Pros

More protection to depositor If bad debt, the bank cannot get back the loan

More confidence Low reserve ratio If any rumours, easy to have bank run

Cons Cash reserve makes no interest

Unable to earn from making loans Less ability to earn

Unfavourable to attract investors

Whether holding excess reserve or not?Risk vs. Return

Money supply with 100% reserve ratio In an economy without bank

MS = Cash only If gov’t issues $1,000 cash, MS = $1,000

Having a bank with 100% reserve $1,000 cash can be saved as deposits MS = $1,000

No loans can be made No additional deposit MS remains unchanged

Cash$1,000

Deposit$0

Money Supply$1,000

Cash$0

Deposit$1,000

Money Supply$1,000

Money supply with 100% reserve ratio Conclusion

With 100% reserve ratio Deposit is kept totally as cash reserve in bank Bank has no further money to make loan No loan No additional deposit MS remains unchanged

With 100%-reserve banking, the existence of banks does not affect the money supply. It only changes its composition.

In other words with reserve ratio < 100% MS

A model of deposit creation under a fractional reserve system

Assumptions ** Minimum reserve ratio < 100% No excess cash reserve,

bank loan out all the reserves in excess of the legal requirement Sufficient demand of loan

the public is willing to borrow money from the bank Public doesn’t hold cash

people deposit their loan into the bank No cash drain or leakage


Illustration Given required reserve ratio = 20% Assume Mr. A deposits $1,000 cash in a bank Balance sheet of the bank after the initial deposit :


Reserves 1000 Deposits

1,000


Illustration 20% of deposit is reserved = $200 80% of deposit can be loan out = $800 Balance sheet of the bank after the initial deposit (w/ loan):

Money supply = $1,000


Reserves Loan

200800

Deposits

1,000


Illustration Suppose Mr. B apply $800 loan from the bank Then he deposit the $800 into the bank Balance sheet of the bank after the second deposit:


Reserves(+800)Loan

$1000

$800

Deposit(+800)

$1,800


Illustration 20% of deposit is reserved

= $200 + $160 = $360 80% of deposit can be loan out

= $800 + $640 = $1440 Balance sheet of the bank after the second deposit (w/ loan):



ReservesLoan

3601,440

Deposits 1,800


Illustration Suppose Mr. C apply $640 loan from the bank Then he deposit the $640 into the bank Balance sheet of the bank after the third deposit:


Reserves(+640)Loan

1,000

1,440

Deposit(+640)

2,440


Illustration 20% of deposit is reserved

= $200 + $160 + $128 = $488 80% of deposit can be loan out

= $800 + $640 + $512 = $1,952 Balance sheet of the bank after the third deposit (w/ loan):



ReservesLoan

4881,952

Deposit 2,440


Illustration Suppose Mr. D apply $512 loan from the bank Then he deposit the $512 into the bank Balance sheet of the bank after the fourth deposit:



Reserves (+512)Loan

1,000

1,952

Deposit(+512)

2,952


The public Change in deposits Change in loans[Deposit x (1-20%)]

1st $1000 $800

2nd $800

[$1000 x 0.8]$640

3rd $640

[$1000 x 0.82]$512

4th $512

[$1000 x 0.83]$409.6

5th $409.6[$1000 x 0.84]

$327.68

6th $327.68

[$1000 x 0.85]$262.144

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Total deposits:The

publicChange in deposits Total

deposits

1st $1,000 $1,000

2nd $1000 x 0.8 = $800 $1,800

3rd $1000 x 0.82 = $640 $2,440

4th $1000 x 0.83 = $512 $2,952

5th $1000 x 0.84 = $409.6 $3,361.6

6th $1000 x 0.85 = $327.86 $3,689.46

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Total deposits

= $1,000 + $1,000(0.8) + $1,000(0.82) + $1,000(0.83) +…

By geometric progression

= $1,000 x

= $1,000 x [ i.e. Initial deposit x ]

= $5,000


Given that reserve ratio = 20% meaning that 80% of deposits can be loaned out

Total loans = Total deposits – required reserve

= $5,000 - $5,000 x 20%

= $5,000 x (1 – 20%)

= $5,000 x 80%

= $4,000


Illustration After many deposits and loans The final status of the bank’s balance sheet:

Money supply increase from $1,000 to $5,000 i.e. MS = $4,000


ReservesLoan

1,0004,000

Deposit 5,000

Deposit creation and the banking multiplier

Given reserve ratio = 20%

Reserves = Deposits x Reserve ratio

Deposits = Reserves x

= Reserves x Banking multiplier

= Initial deposit x Banking multiplier



ReservesLoan

1,0004,000

Deposit 5,000

$5,000 x 20%$1,000

$1,000 x $5,000

$1,000 x 5

Deposit creation and the bank multiplier

The banking multiplier

Banking multiplier =

Minimum reserve ratio (RRR) is the lowest reserve ratio

Max banking multiplier =

=


Deposit-creation ability and the banking multiplier

Deposits = Reserve x

Max. Deposits = Reserve

Example 1: Given the RRR is 20%. If a person saves $1,000 into the bank and the bank keeps the required reserves and loans out the remaining part, what is the maximum increase in deposits?Solution:

Max. Deposits = Reserve x = $1,000 x = $5,000


Example 2Below shows the balance sheet of a bank

a. Suppose there is no excess reserves, calculate i. the required reserve ratio andii. The maximum banking multiplier.

b. Suppose $500 cash is deposited into the bank, calculate the change in deposit.


ReservesLoan

1,0004,000

Deposit 5,000

Example 2Below shows the balance sheet of a bank.

a. Suppose there is no excess reserves, calculate i. The required reserve ratio = x 100% = 20%ii. The maximum banking multiplier = = 5

b. Suppose $500 cash is deposited into the bank, calculate the change in deposit.

The change in deposit = Reserve = $500 x = $2500


ReservesLoan

1,0004,000

Deposit 5,000

Example 3Below shows the balance sheet of a banking system.

Suppose the required reserve ratio is 20% and the public do not hold cash. Determine whether the following statements are true or false.a. The bank reserve ratio is 20%.b. The maximum amount of deposits is $12,500.c. The bank hold excess reserves of $100d. The bank can increase its loans by at most $1,000.


ReservesLoan

7001,800

Deposit 2,500

Example 3a. The bank reserve ratio = x 100% = 28%

(The bank reserve ratio is 20%” is false.)

b. The maximum amount of deposits = Reserve = $700 x = $3500( The maximum amount of deposits is $12,500” is false)

c. Excess reserves held by the banks= Actual reserve - Required reserve= $700 – ($2,500 x 20%)= $700 - $500= $200( “The bank hold excess reserves of $100” is false.)

Example 3

d. Since excess reserve = $200

The banks can loan out the excess reserve.

The max. increase in loan

= Additional loan x banking multiplier

= $200 x = $1000

(‘ The bank can increase its loans by at most $1,000’

is correct.)

Example 4Fill in the balance sheet below to show the final situation if $1,000 cash in deposited into the banking system with required reserve ratio 25% without excess reserve.

Think about:i. What is the banking multiplier? = 4ii. The initial $1,000 deposit dollars is kept and used to support

the final deposit. Then what is the meaning of this $1,000 in the balance sheet? Reserves

iii. How much is the max deposit can be supported by this $1,000 in the banking system? $1,000 x 4 = $4,000


ReservesLoan

1,0003,000

Deposit 4,000

Deposit-creation and money supply

MS = Cash held by the public (C) + Deposit (D)

MS = C + D

Given RRR = 20%If the public save $1,000 cash into the bank

Currency in circulation: $1,000 [i.e. C = - $1,000] Deposits: $5,000 [i.e. D = $1,000 x = $5,000]

MS = C + D = -$1,000 + $5,000

= $4,000

HKCEE 2009/Paper 1/Q.6Study the following balance sheet of a banking system.

Suppose the legal reserve ratio is 20%.a. Calculate the excess reserve of the banking system. (2 marks)

Excess reserve = $300 – ($1000 x 20%)= $100

b. Suppose all excess reserve is loaned out. Calculate the maximum possible amount of total deposits in the banking system. (2 marks)

Max. deposits = $300 x = $1500

c. Hence, calculate the change in money supply. (2 marks)Change in money supply = Change in cash (held by the public) + Change in deposit

= $0 + ($1500 - $1000)= $500


ReservesLoan

300700

Deposit 1,000

Monetary base ( 貨幣基礎 / 銀根 )

MS = Cash held by the public + Total Deposit

MS = Cash held by the public + Initial deposits x

Monetary base

Total Deposit = Initial deposit x Banking multiplier = Reserves x Banking multiplier

= Reserves x

ExampleGiven RRR = 20%, Cash held by the public = $500 andInitial deposit = $1000.Find i. Monetary base & ii. Money supply

Solution:i. Monetary base = Cash held by the public + Initial deposits

= $500 + $1000= $1500

ii. Money supply = Cash held by the public + Deposits= Cash held by the public + Reserves x = $500 + $1000 x 1/0.2= $5,500

HKDSE Practice Paper 2/Q.14The following table shows the balance sheet of the banking system of an economy:

Suppose the public in this economy always holds $500 million cash and the banking system never holds excess reserves.

a. Calculate the monetary base and money supply of the economy. (2 marks)

b. Suppose the central bank lowers the minimum reserve ratio of the banking system by 5%.i. Explain whether the monetary base of the economy changes. (2 marks) ii. Calculate the new money supply. Show your working. (4 marks)

Assets ($million) Liabilities ($million)

ReservesLoan

10003000

Deposit 4000

HKDSE Practice Paper 2/Q.14The following table shows the balance sheet of the banking system of an economy:

a. Monetary base = $1 000 million + $500 million = $1 500 million (1)Money supply = $4 000 million + $500 million = $4 500 million (1)

b. (i) No, because (1) the policy affects neither the amount of reserves nor the cash held by the general public. (1)(ii) Before the policy change, the minimum reserve ratio = $4 000million / $1 000million = 0.25 (1) The new minimum reserve ratio = 0.25 – 0.05 = 0.2 (1) The banks will lend out the excess reserves. New deposits = $1 000 million x = $5 000 million (1) New money supply = $500 million + $5 000 million = $5 500 million (1)

Assets ($million) Liabilities ($million)

ReservesLoan

10003000

Deposit 4000

No. of banks and the form of loans do not affect deposit creation In reality, many banks Do not affect deposit creation

Loan from Bank A Deposit to Bank B Loan from Bank B Deposit to Bank C …

For details, read p.110

The public

Change in deposits Change in loans[Deposit x (1-20%)]

1st $1000 $800

2nd $800 $640

3rd $640 $512

4th $512 $409.6

5th $409.6 $327.68

6th $327.86 $262.144

. . .Deposit as a whole is not affected

Realistic assumption Assumptions of maximum deposit creation

1. Banks adopts fractional reserve system2. No excess reserves held by banks3. Sufficient demand of loans4. No cash drain / leakage

In real world: Only assumption 1 is true. Assumption 2. Reason: for risk management Assumption 3. Reason: interest rate loans Assumption 4. Reason: the public need cash

Violations of assumption Violation of assumption 2: Excess reserve

Banks usually hold excess reserve to reduce risk Actual reserve ratio Banking multiplier

Violation of assumption 3: Insufficient demand of loan High reserves Less amount for loan

Banks’ profit interest rate Demand of loan

Violation of assumption 4: Cash leakage The public holds cash less loan get back to the banks as deposit Deposit Loan Deposit creation can’t be maximized

Conclusion:Model of deposit creation

Assumption Able to have deposit creation?

Able to maximize deposit?

Fractional reserve system -

No excess reserves -

Sufficient loans -

No cash leakage -

Necessary conditions for maximizing deposit

Necessary condition for deposit creation

Reserve shortage What happen if Mr. A withdraws $100 from

the bank?

Total deposit = $5,000 - $100 = $4,900


ReservesLoan

1,0004,000

Deposit 5,000


Reserves(-100)Loan

900

4,000

Deposit(-100)

4,900

Reserve shortage

After withdrawal,

Reserve ratio = x 100% = 18.37% However, required reserve ratio (RRR) = 20% Not accepted by the law:

Actual reserve ratio < RRR necessary to increase reserves to fulfill the

minimum reserve requirement


Reserves(-100)Loan

900

4,000

Deposit(-100)

4,900

Reserve shortage

If deposit = $4,900 & RRR = 20%

Required reserves = $4,900 x 20% = $980 However, after $100 withdrawal

Actual reserves = $900 Reserve shortage:

Actual reserves < Required reserves Amount of reserve shortage = $980 - $900

= $80


Reserves(-100)Loan

900

4,000

Deposit(-100)

4,900

Deposit contraction( 存款收縮 )

Reserve shortage = $80, what can the banks do?

Recall loans The bank recalls loans from Mr. B = $80

Since bank holds 20% reserves & loans out 80% of deposit For every $1 withdrawal, the bank has to recall $0.8 of loans to

maintain sufficient reserves

Effect Mr. B doesn’t have cash

When a bank recalls loans, he needs to withdraw $80 from his deposit

Another round of reserve shortage occurs

Deposit contraction( 存款收縮 ) Reserve shortage:

Recall loans from Mr. B

Mr. B’s withdrawal


ReservesLoan

9004,000

Deposit 4,900


Reserves(+80)Loan(-80)

980

3,920

Deposit 4,900


Reserves(-80)Loan

900

3,920

Deposit(-80)

4,820

Deposit contraction( 存款收縮 )

Withdrawal Change in deposits Change in loans

1st - $100 - $80

2nd - $80 - $64

3rd - $64 - $51.2

4th - $51.2 - $40.96

5th - $40.96 - $32.768

6th - $32.768 - $26.2144

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Deposit contraction Initial withdrawal

Mr. A withdraws $100 from a bank To keep enough reserves, the bank recalls $80 from Mr. B

2nd round withdrawal Mr. B withdraws $80 from a bank to repay his debt To keep enough reserves, the bank recalls $64 from Mr. C

3rd round withdrawal Mr. C withdraws $64 from a bank to repay his debt To keep enough reserves, the bank recalls $51.2 from Mr. D

Deposit contraction and the banking multiplier


Max. Deposits = Reserve


= - $100 x

= - $500

Deposit contraction

Before withdrawal:

After withdrawal:Max. change of loans = Change in deposits – Change in reserves

= - $500 – [-$500 x 20%]

= - $500 x (1 – RRR)

= - $500 x (1 – 20%)

= - $400


Reserves(-100)Loan(-400)

900

3,600

Deposit(-500)

4,500


ReservesLoan

1,0004,000

Deposit 5,000

ExampleBelow is the balance sheet of the banking system. Suppose the bank has no excess reserves:

If a depositor withdraws $100 cash from the bank, what is the maximum change in the deposits?Answers:Reserve ratio = x 100% = 20%Change in deposits = Reserve x

= - $100 x

= - $500


ReservesLoan

4001,600

Deposit 2,000


ReservesLoan

3001,200

Deposit 1,500

Monetary policy

Interest

rate

Borrow $$ to buy car now? ( Yes / No )

Borrow $$ from the bank to expand production? ( Yes / No )

Apply mortgage to buy a house now? ( Yes / No )

Consumption

Investment Production

Monetary policy ( 貨幣政策 )

The central bank’s control of

1. the money supply or

2. the interest rate

to achieve certain economic objectives

MS = Cash held by the public + Deposits How to control the amount of cash in public? How to influence deposits?

I. Monetary policy tools

1. Issuing banknotes Cash held by the public

Money supply Cash

Deposit Reserves Loans Deposit creation

Money supply Most likely for MS increasing


2. Minimum reserve requirement RRR

Cash reserves in banks Ability to make loans Deposits creation Money supply

RRR Cash reserves in banks Ability to make loans

Deposits creation Money supply


3. Open market operation Controlled by central banks

Reserves and deposits at the central bank Operation with commercial banks Buying and selling gov’t bonds

I. Monetary policy tools3. Open market operation

a. Open market purchase Assume ABC Company (the public) holds gov’t bond Central bank buys bonds (worth $1million) by paying cheque

to ABC Co. ABC Co. deposits the cheque into commercial bank Central bank pays Bank A $1million for cheque clearing Deposit: Increase by $1 million Through deposit creation, MS

Central bank Bank A ABC Co.[holding Gov’t

bonds]

$1million

ChequeDeposit

Illustration

After the open market purchase:

In short, both reserves and deposits increase by $1 million.Given the RRR=20%Total Deposits = Initial deposits x Banking multiplier

= $1,000,000 x

= $5,000,000 Ms = Cash + Deposits

= $0 + $5,000,000= $5,000,000


Reserves +1,000,000 Deposits +1,000,000

I. Monetary policy tools3. Open market operation

b. Open market sale Gov’t sell bonds to the public ABC Company bank buys bonds (worth $1million) by paying

cheque to the central bank Central bank withdraws $1million for ABC’s account Deposit: decrease by $1 million Through deposit contraction, MS

Central bank Bank A ABC Co.[holding Gov’t

bonds]

$1million

Deposit

$1million

I. Monetary policy tools4. Discount rate

Interest rate (Cost) of loan from the central bank to commercial banks

If discount rate Cost of loan Commercial banks: less incentive to borrow

Loan out Deposit Reserve Ability of deposit creation Ms

Conclusion: Discount rate Reserves and Ms

I. Monetary policy tools4. Discount rate

If discount rate Cost of loan Commercial banks: more incentive to borrow

Loan out Deposit Reserve Ability of deposit creation Ms

Conclusion: Discount rate Reserves and Ms

Conclusion: Monetary policy tools

Money Supply

Open market operations

Discount rate

Minimum reserve ratio

Issuance of banknotes

Monetarypolicytools

Cash held by the public

Commercial banks’ deposits at the

central bankReserves Deposits

II. Controlling of interest rateEffects on interest rate

If Gov’t sell bonds,

Ms (i.e. capital in the market flow towards the central bank)

Deposit

Reserve

Loanable fund in the market Interest rate

Quantity of money

Interest rate (%)

0

MS1

MS2

Q1

r1

r2

Md

Q2

II. Controlling of interest rate By controlling Ms,

the gov’t indirectly controls interest rate affect the incentive of loan making

Relationship:

Ms interest rate

Ms interest rate

Types of monetary policy

Carry out by the central bank Expansionary monetary policy Contractionary monetary policy

Monetary policy

Types Expansionary Contractionary

Central bank controlsMoney supply Interest rate

Money supply Interest rate

Tools

Open market operation Buy bonds Sell bonds

Discount rate

Minimum reserve ratio

Issuance of banknotes

Effects of monetary policy

Expansionary monetary policy ( Ms , r ) Banks have more to loan out More people are willing to borrow

Consumption Investment

GDP

Gov’t uses expansionary monetary policy to booth the economic growth E.g. the US Gov’t adopted QE (Quantitative ease) in 2008

& QE2 policies in 2010


Expansionary monetary policy ( Ms , r ) Pros

GDP Consumption Investment

Employment Investment Firms will hire more labour

Cons Inflation

Consumption Demand of goods Price


Contractionary monetary policy ( Ms , r ) Banks have less to loan out With high interest rate, less people make loan

Consumption Investment

GDP

Gov’t uses contractionary monetary policy to prevent overheated economy


Contractionary monetary policy ( Ms , r ) Pros

Avoid economic overheat Investment Production

Avoid inflation Consumption Demand of goods Price

Cons Unemployment

Investment

Firms will not hire or even lay off excess labour

Monetary policy in Hong Kong Easy to be affected by foreign economies No HK bonds buying or selling

Linked exchange rate system Aim at keeping exchange rate: HKD7.8 = USD 1 Operation:

Linked exchange rate [ HKD7.8 = USD1 ]

Exchange rateHKD exchange rate[ HKD7.5 = USD1 ]

HKD exchange rate [ HKD8 = USD1 ]

HKMA’s actionSell HK Dollar

- to lower the price of HKD- Maintain HKD7.8 = USD1

Buy HK Dollar- to raise the price of HKD- Maintain HKD7.8 = USD1

Result Ms Ms

Monetary policy in Hong Kong Conclusion

Issuance of banknotes - usually around Chinese New Year

Minimum reserve ratio- Liquidity ratio ≥ 25%

Discount rate- Replaced by HIBOR (Hong Kong Inter-bank offered rate)

Open market operation Replaced by the “Linked Exchange Rate System” Chance to be attacked by global speculators, lost the

function of controlling money supply

Economics Chapter 4 Bank Credit and Monetary Policy.

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Transcript of Economics Chapter 4 Bank Credit and Monetary Policy.