Is the amount of money that the banks have to have on hand, while the rest of the money can be loaned out.
Quantitative Easing -
Also known as Ex Nihilo(out of nothing) - is used when the bank rate is already close to zero. The boc create electrical money to buy government and corporate bonds and this put additional money into the hands of the government and businesses so they can spend. once the money has caused the economy to come back to equilibrium, the Bank of Canada slowly takes the money back out of circulation and make it disappear. Problems can arise with this because it can eventually lead to higher prices or inflation.
- Print banknotes or manufacture coins
- Bank lending
- Every time a chartered bank creates a loan or lends money, they create money. While near banks cannot
- Fractional Reserve Banking (target reserve requirements)
Is the amount of money that the banks have to have on hand, while the rest of the money can be loaned out.- Quantitative Easing -
Also known as Ex Nihilo(out of nothing) - is used when the bank rate is already close to zero. The boc create electrical money to buy government and corporate bonds and this put additional money into the hands of the government and businesses so they can spend. once the money has caused the economy to come back to equilibrium, the Bank of Canada slowly takes the money back out of circulation and make it disappear. Problems can arise with this because it can eventually lead to higher prices or inflation.Investopedia,"Quantitative easing". Accessed April 14 2012,( http://www.investopedia.com/terms/q/quantitative-easing.asp
Investopedia, "Fractional Reserve Banking", Accessed April 14 2012, (http://www.investopedia.com/terms/f/fractional-reservebanking.asp