遇到一个习题不是很确定答案,哪位同学帮忙解解=)
The goal of this exercise is to evaluate and contrast two different banking systems. The first system, system 1, corresponds to an economy with many competing private banks and one Reserve Bank. It corresponds to today’s banking system (and case 3 in the lecture notes, that is the fiat money system with fractional reserves). System 2 corresponds to the free-banking system, in which many private banks compete but there is no Reserve Bank and therefore no base money.
Question 2.1: Do some research on free-banking and give a brief definition of it (no more than 8 lines). [2 marks]
Question 2.2: On each of the following dimensions of banking, explain how each banking system works and contrast the two systems:
The creation of private money [1+1 mark]
The settlement of bilateral payments between private banks [1.5+1.5 marks]
The consequences for one private bank of creating two much private money [1.5+1.5 marks]