(1) Discuss the process of money creation by the commercial banks(2) Suppose the central bank sells $5 billion worth of bonds to banks. Explain by using a balance sheets of a hypothetical bank, how this will lead to a contraction of the money supply.(3) Explain in this context the statement that “an individual bank has little ability to expand the money supply unless all the other banks expand in step”.(4) Give a short critique of the model of the money creation process. How may banks behavior influence the money creation process?

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(1) Discuss the process of money creation by the commercial banks(2) Suppose the central bank sells $5 billion worth of bonds to banks. Explain by using a balance sheets of a hypothetical bank, how this will lead to a contraction of the money supply.(3) Explain in this context the statement that “an individual bank has little ability to expand the money supply unless all the other banks expand in step”.(4) Give a short critique of the model of the money creation process. How may banks behavior influence the money creation process?

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"FIRST15"

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