Page 4 - FINAL CFA I SLIDES JUNE 2019 DAY 6

Session Unit 5:

18. Monetary and Fiscal Policy

LOS 18.c: Explain the money creation process., p.106

What Are The Effects of Bank Policy
p. 107, Say Fractional Reserve (FR) banking policy is 25%, to Decrease or Increase FR?
and you deposit R1000; How much money can be created?

1) 1000 =1000.00
2) 1000 * 75% = 750.00
3) 1000 * 75%*75% = 562.50

4) 1000 * 75%*75%*75% = 421.87
5) 1000 * 75%*75%*75%*75% = 316.41

5) 1000 * 75%*++++++ = ++++
= 4000.00

Which is FR policy is Expansionary
and which is Contractionary?
Relationship of Money and the Price Level, p.107

The Quantity Theory of Money (QTM) = Quantity Equation Exchange (QEE):

Hence Monetary Policy

Is Used To Fight Inflation!