Theoretical Background: Money Multiplier It can be see, 1000e,. turned"into 10000∈. The Money№utip|ier Let the reserve ratio be r Money multiplier m =I/R The Money multiplier equals the total money supply, that one unit of money will create
Theoretical Background: Money Multiplier It can be see 1000 It can be see, 1000 € „turned into “ 10000€. The Money Multiplier ◦ Let the Reserve ratio be R. ◦ Money Multiplier m = 1/R Th M lti li l th t t l Th e Money multiplier equals t h e total money supply, that one unit of money will create
Theoretical Background: Money Multiplie er R Obviously, manipulating R will change m, and so the money supply. 3食m↓ RR Changes in the money supply will affect price level. Reserve requirements are an important instrument of monetary control
Theoretical Background: Money Multiplier 1 m ൌ R Obviously, manipulating R will change m, and so the mone y pp y su l . R m R m Ch i h l ill ff Changes i n t h e money supply will affect price level. R R Reserve Requirements are an important instrument of monetary control
Theoretical Background: Central Bank Definition An institution designed to oversee the banking system and regulate the quantity of money in n the economy Means of monetary control: Reserve requirements Open-market Operations Discount rate
Theoretical Background: Central Bank Definition: An institution designed to oversee the banking system and regulate the quantity of money in the economy. Means of Monetar y Control: ◦ Reserve Requirements ◦ Open -market Operations ◦ Discount Rate
Chinas Central Bank: The Peoples Bank of china The people s bank of china is the bank that has the more financial assets in the world The people' s bank was established in 948 First located in Shijiazhuang hebei The central bank status is legally confirmed in 995
China’s Central Bank: The People’s Bank of China The People’s Bank of China is the Bank that has the more financial assets in the world Th P l ’ B k bli h d i 1948 Th e People’s Bank was establi s h ed i n1948 First located in Shi j g, iazhuang, Hebei The central bank status is legally confirmed in 1995
Chinas Central Bank: The Peoples Bank of china ● Duties To define and implement the monetary policy To limite or prevent from financial risks To ensure the financial stability
China’s Central Bank: The People’s Bank of China Duties ◦ To define and implement implement the monetary monetary policy ◦ To limite or prevent from financial risks ◦ To ensure the financial stability