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CENTRAL BANK ACCOUNTING Monday, February 14, 2011

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Page 1: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

CENTRAL BANK ACCOUNTING

Monday, February 14, 2011

Page 2: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

Central BankCentral Bank

CENTRAL BANK ACCOUNTS

R = International Reserves

M = Money supply

D = Domestic Credit

Central BankCentral Bank

R M

D

Monday, February 14, 2011

Page 3: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

START

Assume we are in an emerging market

Assume that exchange rate is fixed to one peso is one dollar

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 4: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

Transactions among consumers

Increase money supply

Taxes and Government expenses (fiscal responsibility)

Fiscal expenditures and borrow from consumers

Fiscal expenditures and borrow from central bank

Fiscal expenditures and foreign borrowing

Export services

Monday, February 14, 2011

Page 5: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

CONSUMERS

Any transaction between consumers does not change the balance sheet.

Can all the pesos be converted to dollars at the prevailing rate?

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 6: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply

Taxes and Government expenses (fiscal responsibility)

Fiscal expenditures and borrow from consumers

Fiscal expenditures and borrow from central bank

Fiscal expenditures and foreign borrowing

Export services

Monday, February 14, 2011

Page 7: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

INCREASE MONEY

Central bank purchases from consumers the bonds

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 8: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

INCREASE MONEY

Central bank purchases from consumers the bonds

Central BankCentral BankCentral BankCentral Bank

R 4 M 4+2

D 0+2

ConsumersConsumersConsumersConsumers

Cash 4+2

Bond 2-2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 9: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

INCREASE MONEY

Can all the pesos be converted to dollars at the prevailing rate?

Printing without backing

Central BankCentral BankCentral BankCentral Bank

R 4 M 6

D 2

ConsumersConsumersConsumersConsumers

Cash 6

Bond 0

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 10: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply 0 0

Taxes and Government expenses (fiscal responsibility)

Fiscal expenditures and borrow from consumers

Fiscal expenditures and borrow from central bank

Fiscal expenditures and foreign borrowing

Export services

Monday, February 14, 2011

Increase money supply

Page 11: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

IMPACT ON THE INTEREST RATE

Pb

Bonds

Pb = 1

1 + ib

Demand

Supply

Supply is given by the treasuries

decision to borrow

Demand includes 3 agents:

•How many bonds do consumers want?

•How many do foreigners want?

•How many the central bank wants?

Monday, February 14, 2011

Page 12: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

IMPACT ON THE INTEREST RATE

Pb

Bonds

Pb = 1

1 + ib

Demand

Supply Pb

Bonds

Monday, February 14, 2011

Page 13: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TAXES AND EXPENDITURES

Tax consumers and spend money

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 14: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TAXES AND EXPENDITURES

Tax consumers - taxes are paid in cash

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4-2

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2 Bond 2

Monday, February 14, 2011

Page 15: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TAXES AND EXPENDITURES

When the government spends the money they buy services from consumers and pay the cash

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 2+2

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2-2 Bond 2

Monday, February 14, 2011

Page 16: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TAXES AND EXPENDITURES

Fiscal policy with balance budget has no impact on the aggregate balance sheet.

Can all the pesos be converted to dollars at the prevailing rate?

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 17: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply 0 0

Taxes and Government expenses (fiscal responsibility) 0 0 0

Fiscal expenditures and borrow from consumers

Fiscal expenditures and borrow from central bank

Fiscal expenditures and foreign borrowing

Export services

Monday, February 14, 2011

Increase money supply 0 0

Page 18: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CONSUMERS

Now the government borrows from the consumers (sells bonds in exchange of cash)

And then it spends the cash

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 19: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CONSUMERS

Selling the bond

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4-2

Bond 2+2

GovernmentGovernmentGovernmentGovernment

Cash 2 Bond 2+2

Monday, February 14, 2011

Page 20: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CONSUMERS

Total cash out of the central bank does not change with the transaction.

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 2

Bond 4

GovernmentGovernmentGovernmentGovernment

Cash 2 Bond 4

Monday, February 14, 2011

Page 21: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CONSUMERS

Spend taxes

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 2+2

Bond 4

GovernmentGovernmentGovernmentGovernment

Cash 2-2 Bond 4

Monday, February 14, 2011

Page 22: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CONSUMERS

Can all the pesos be converted to dollars at the prevailing rate?

Government debt increases. The consequence is that domestic interest rates increase. That is exactly what happens in the ISLM.

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 4

GovernmentGovernmentGovernmentGovernment

Bond 4

Monday, February 14, 2011

Page 23: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply 0 0

Taxes and Government expenses (fiscal responsibility) 0 0 0

Fiscal expenditures and borrow from consumers 0 0

Fiscal expenditures and borrow from central bank

Fiscal expenditures and foreign borrowing

Export services

Monday, February 14, 2011

Fiscal expenditures and borrow from consumers 0 0

Page 24: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

IMPACT ON THE INTEREST RATE

Pb

Bonds

Pb = 1

1 + ib

Demand

Supply Pb

Bonds

Monday, February 14, 2011

Page 25: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CENTRAL BANK

The government borrows from the central bank (sells bonds in exchange of cash)

And then it spends the cash

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 2

Monday, February 14, 2011

Page 26: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CENTRAL BANK

Borrowing from the Central Bank (selling the bond to the Central Bank)

The Central Bank pays with cash (in other words we are printing money again).

Central BankCentral BankCentral BankCentral Bank

R 4 M 4+2

D 0+2

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2 Bond 2+2

Monday, February 14, 2011

Page 27: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CENTRAL BANK

Debt of the government has increased

Cash out of the central bank has also increased

Central BankCentral BankCentral BankCentral Bank

R 4 M 6

D 2

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2 Bond 4

Monday, February 14, 2011

Page 28: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CENTRAL BANK

Spending

Central BankCentral BankCentral BankCentral Bank

R 4 M 6

D 2

ConsumersConsumersConsumersConsumers

Cash 4+2

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2-2 Bond 2+2

Monday, February 14, 2011

Page 29: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM CENTRAL BANK

Debt increases and there is an imbalance between domestic currency and reserves.

Can all the pesos be converted to dollars at the prevailing rate?

Central BankCentral BankCentral BankCentral Bank

R 4 M 6

D 2

ConsumersConsumersConsumersConsumers

Cash 6

Bond 2

GovernmentGovernmentGovernmentGovernment

Bond 4

Monday, February 14, 2011

Page 30: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply 0 0

Taxes and Government expenses (fiscal responsibility) 0 0 0

Fiscal expenditures and borrow from consumers 0 0

Fiscal expenditures and borrow from central bank 0

Fiscal expenditures and foreign borrowing

Export services

Monday, February 14, 2011

Fiscal expenditures and borrow from consumers

Fiscal expenditures and borrow from central bank

0

0

0

Page 31: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

The government issues debt in foreign currency (US$) to foreigners and get dollars for it.

They convert the dollars into pesos in the central bank

Then the spend the money in the consumers

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

$’s 0 For. Bond 0

ForeignersForeignersForeignersForeigners

$’s 10

For. Debt 0

Monday, February 14, 2011

Page 32: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

Borrow from Foreigners

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

$’s 0+2 For. Bond 0+2

ForeignersForeignersForeignersForeigners

$’s 10-2

For. Debt 0+2

Monday, February 14, 2011

Page 33: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

For the moment there is no impact on the domestic economy.

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

$’s 2 For. Bond 2

ForeignersForeignersForeignersForeigners

$’s 8

For. Debt 2

Monday, February 14, 2011

Page 34: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

Change the dollars to pesos in the central bank

Central BankCentral BankCentral BankCentral Bank

R 4+2 M 4+2

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 0+2 Bond 2

$’s 2-2 For. Bond 2

ForeignersForeignersForeignersForeigners

$’s 8

For. Debt 2

Monday, February 14, 2011

Page 35: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

Change the dollars to pesos in the central bank

Central BankCentral BankCentral BankCentral Bank

R 6 M 6

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2 Bond 2

$’s 0 For. Bond 2

ForeignersForeignersForeignersForeigners

$’s 8

For. Debt 2

Monday, February 14, 2011

Page 36: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

Spend the money

Central BankCentral BankCentral BankCentral Bank

R 6 M 6

D 0

ConsumersConsumersConsumersConsumers

Cash 4+2

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 2-2 Bond 2

$’s 0 For. Bond 2

ForeignersForeignersForeignersForeigners

$’s 8

For. Debt 2

Monday, February 14, 2011

Page 37: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPENDITURES AND BORROW FROM FOREIGNERS

Notice that credibility is not affected!

Foreign debt increases. That’s all! This is why a lot of countries prefer to borrow in international markets. Very small consequences to the local economy.

Central BankCentral BankCentral BankCentral Bank

R 6 M 6

D 0

ConsumersConsumersConsumersConsumers

Cash 6

Bond 2

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

$’s 0 For. Bond 2

ForeignersForeignersForeignersForeigners

$’s 8

For. Debt 2

Monday, February 14, 2011

Page 38: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply 0 0

Taxes and Government expenses (fiscal responsibility) 0 0 0

Fiscal expenditures and borrow from consumers 0 0

Fiscal expenditures and borrow from central bank 0

Fiscal expenditures and foreign borrowing 0 0

Export services

Monday, February 14, 2011

0 0

0 0

0

Fiscal expenditures and borrow from consumers

Fiscal expenditures and borrow from central bank

Fiscal expenditures and foreign borrowing

Page 39: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPORTS OF SERVICES

Consumers sell services to foreigners. Foreigners pay with dollars.

The consumers go to the central bank and exchange the dollars for pesos.

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

$’s 0

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

ForeignersForeignersForeignersForeigners

$’s 10

Monday, February 14, 2011

Page 40: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPORTS OF SERVICES

Sell services and goods to foreigners (the act of exporting)

Central BankCentral BankCentral BankCentral Bank

R 4 M 4

D 0

ConsumersConsumersConsumersConsumers

Cash 4

Bond 2

$’s 0+2

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

ForeignersForeignersForeignersForeigners

$’s 10-2

Monday, February 14, 2011

Page 41: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPORTS OF SERVICES

Exchange of dollars for pesos

Central BankCentral BankCentral BankCentral Bank

R 4+2 M 4+2

D 0

ConsumersConsumersConsumersConsumers

Cash 4+2

Bond 2

$’s 2-2

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

ForeignersForeignersForeignersForeigners

$’s 10

Monday, February 14, 2011

Page 42: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

EXPORTS OF SERVICES

Reserves increase

Credibility of the currency is unafected

Central BankCentral BankCentral BankCentral Bank

R 6 M 6

D 0

ConsumersConsumersConsumersConsumers

Cash 6

Bond 2

$’s 0

GovernmentGovernmentGovernmentGovernment

Cash 0 Bond 2

ForeignersForeignersForeignersForeigners

$’s 8

Monday, February 14, 2011

Page 43: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD

Transactions among consumers 0 0 0

Increase money supply 0 0

Taxes and Government expenses (fiscal responsibility) 0 0 0

Fiscal expenditures and borrow from consumers 0 0

Fiscal expenditures and borrow from central bank 0

Fiscal expenditures and foreign borrowing 0 0

Export services 0 0 0

Monday, February 14, 2011

Fiscal expenditures and foreign borrowing

Fiscal expenditures and borrow from central bank

Fiscal expenditures and borrow from consumers 0 0

0

0 0

Page 44: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

TRANSACTIONS

M/R DD FD R

Transactions among consumers 0 0 0 0

Increase money supply 0 0 0

Taxes and Government expenses (fiscal responsibility) 0 0 0 0

Fiscal expenditures and borrow from consumers 0 0 0

Fiscal expenditures and borrow from central bank 0 0

Fiscal expenditures and foreign borrowing 0 0

Export services 0 0 0

Monday, February 14, 2011

Page 45: CENTRAL BANK ACCOUNTING - MIT … Transactions among consumers Increase money supply Taxes and Government expenses (fiscal responsibility) Fiscal expenditures and borrow from consumers

MIT OpenCourseWarehttp://ocw.mit.edu

15.012 Applied Macro- and International Economics Spring 2011

For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.