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Chapter 14 The Money Supply Process
Chapter Objectives
By the end of this chapter, students should be able to:
- Describe who determines the money supply.
- Explain how the central bank’s balance sheet differs from the balance sheets of commercial banks and other depository institutions.
- Define the monetary base and explain its importance.
- Define open market operations and explain how they affect the monetary base.
- Describe the multiple deposit creation process.
- Define the simple deposit multiplier and explain its information content.
- List and explain the two major limitations or assumptions of the simple deposit multiplier.