petergarylee

A, C and D make the bank to maintain its minimum reserve(the required reserve) level. But in B , the condition of actual reserve is higher than required reserve. As a result, an increase in demand of bank loan reduce the amount of excess reserve to satisfy the demand, thus the actual reserve ratio decrease.

To clarify, without any clear information stating the reserve condition of the bank, we should assume the reserve is in minimum reserve level where the excess amount of deposit will be in money creation. Only B says the demand of loan increase, and the only condition that the bank can lend more is: the bank has excess reserve.

petergarylee

In a simple way, you can draw the MD and MS graph. Where nominal interest rate= real interest rate + inflation rate.  If there is inflation, nominal interest rate will decrease . MS is always constant(only government and bank can adjust it), thus a decrease in interest rate causes MD to decrease to reach its equilibrium level. The theory of transection and asset demand of money takes more time to assume and explain . Do you want me to do that? ( it will be in a lower priority cuz it takes more time, sorry)

manvela

but i wonder change in required reserve ratio only change the amount of required and excess reserve ? but not actual reserve ,so that there is no effect to monetary base?

petergarylee

plz have a look on reply no.27

tony0038

短缺係唔係市場失效
點解唔係？

咁市場失效係咩？
有咩會令市場失效出現？

petergarylee

Sorry, these kind of theoretical question(inefficient market) cant be answered in here because if I miss some points, it will cause misleading to you, plz refer to your text book. But shortage is one form of inefficient market because it is not in the equilibrium level of production, under shortage, MB> equilibrium P >MC, , which is in inefficient level of production.