Introduction to the Reserve Ratio

The reserve ratio is the fraction of total deposits that a bank keeps on hand as reserves (i.e. cash in the vault). Technically, the reserve ratio can also take the form of a required reserve ratio, or the fraction of deposits that a bank is required to keep on hand as reserves, or an excess reserve ratio, the fraction of total deposits that a bank chooses to keep as reserves above and beyond what it is required to hold. Now that weve explored the conceptual definition, lets look at a question related to the reserve ratio. Suppose the required reserve ratio is 0.2. If an extra $20 billion in reserves is injected into the banking system through an open market purchase of bonds, by how much can demand deposits increase? Would your answer be different if the required reserve ratio was 0.1? First, well examine what the required reserve ratio is. What Is the Reserve Ratio? The reserve ratio is the percentage of depositors bank balances that the banks have on hand. So if a bank has $10 million in deposits, and $1.5 million of those are currently in the bank, then the bank has a reserve ratio of 15%. In most countries, banks are required to keep a minimum percentage of deposits on hand, known as the required reserve ratio.This required reserve ratio is put in place to ensure that banks do not run out of cash on hand to meet the demand for withdrawals. What do the banks do with the money they dont keep on hand? They loan it out to other customers! Knowing this, we can figure out what happens when the money supply increases. When the Federal Reserve buys bonds on the open market, it buys those bonds from investors, increasing the amount of cash those investors hold. They can now do one of two things with the money: Put it in the bank.Use it to make a purchase (such as a consumer good, or a financial investment like a stock or bond) Its possible they could decide to put the money under their mattress or burn it, but generally, the money will either be spent or put into the bank. If every investor who sold a bond put her money in the bank, bank balances would initially increase by $20 billion dollars. Its likely that some of them will spend the money. When they spend the money, theyre essentially transferring the money to someone else. That someone else will now either put the money in the bank or spend it. Eventually, all of that 20 billion dollars will be put into the bank. So bank balances rise by $20 billion. If the reserve ratio is 20%, then the banks are required to keep $4 billion on hand. The other $16 billion they can loan out. What happens to that $16 billion the banks make in loans? Well, it is either put back into banks, or it is spent. But as before, eventually, the money has to find its way back to a bank. So bank balances rise by an additional $16 billion. Since the reserve ratio is 20%, the bank must hold onto $3.2 billion (20% of $16 billion). That leaves $12.8 billion available to be loaned out. Note that the $12.8 billion is 80% of $16 billion, and $16 billion is 80% of $20 billion. In the first period of the cycle, the bank could loan out 80% of $20 billion, in the second period of the cycle, the bank could loan out 80% of 80% of $20 billion, and so on. Thus the amount of money the bank can loan out in some period ​n of the cycle is given by: $20 billion * (80%)n where n represents what period we are in. To think of the problem more generally, we need to define a few variables: Variables Let A be the amount of money injected into the system (in our case, $20 billion dollars)Let r be the required reserve ratio (in our case 20%).Let T be the total amount the bank loans outAs above, n will represent the period we are in. So the amount the bank can lend out in any period is given by: A*(1-r)n This implies that the total amount the bank loans out is: T A*(1-r)1 A*(1-r)2 A*(1-r)3 ... for every period to infinity. Obviously, we cannot directly calculate the amount the bank loans out each period and sum them all together, as there are an infinite number of terms. However, from mathematics we know the following relationship holds for an infinite series: x1 x2 x3 x4 ... x / (1-x) Notice that in our equation each term is multiplied by A. If we pull that out as a common factor we have: T A[(1-r)1 (1-r)2 (1-r)3 ...] Notice that the terms in the square brackets are identical to our infinite series of x terms, with (1-r) replacing x. If we replace x with (1-r), then the series equals (1-r)/(1 - (1 - r)), which simplifies to 1/r - 1. So the total amount the bank loans out is: T A*(1/r - 1) So if A 20 billion and r 20%, then the total amount the bank loans out is: T $20 billion * (1/0.2 - 1) $80 billion. Recall that all the money that is loaned out is eventually put back into the bank. If we want to know how much total deposits go up, we also need to include the original $20 billion that was deposited in the bank. So the total increase is $100 billion dollars. We can represent the total increase in deposits (D) by the formula: D A T But since T A*(1/r - 1), we have after substitution: D A A*(1/r - 1) A*(1/r). So after all this complexity, we are left with the simple formula D A*(1/r). If our required reserve ratio were instead 0.1, total deposits would go up by $200 billion (D $20b * (1/0.1). With the simple formula D A*(1/r) we can quickly and easily determine what effect an open-market sale of bonds will have on the money supply.

The Theory Of Classical Conditioning - 1419 Words

Classical conditioning was first observed and developed by a Russian physiologist, Ivan Pavlov who lived from (1927-1960). The concept of classical conditioning is widely considered to be the most fundamental form of learning. Even before Ivan Pavlov named the process of conditioning, his work was considered ahead of his time (Feeser, 2002, p. 24). In fact, Pavlov was presented the Nobel Prize in Physiology and Nero Medicine for his research on the digestion system of dogs (Feeser, 2002, p. 24). To further his digestion research, Pavlov devised a procedure for surgical procedure implanting a tube, called a fistula, into animals that were still living. This allowed Pavlov to collect digestive secretions, and measure them, such as those secreted in the stomach or the mouth (Feeser, 2002, p. 24). This was a monumental first, because up until Pavlov s advancements, almost everything that was known about physiological processes was revealed from studies involving acute (temporary or sacr ificed animals) as opposed to operatic preparations (long-term and in living animals). Pavlov was always interested mainly in the understanding of reflexive occurrences when food was placed into the mouth and as it passed through the other parts of the digestive system, including the stomach (Feeser, 2002, p. 27). For example, Professor Pavlov or one of his many personal assistants would put meat into the mouth of a dog or dogs and then measure the amount of saliva that passed through a salivaryShow MoreRelatedThe Theory Of Classical Conditioning929 Words   |  4 PagesDiscussion 5 1. Define: Classical Conditioning is learning theory based on the assumption that the learning process occurs due to associations between an environmental stimulus and a natural occurring stimulus, as indicated in our textbook. This learning theory was developed by John Watson. He proposed that this theory is able to explain human behavior. Watson also assumed that our environment shapes our personality as a whole. His ideas were influenced by the findings of Ivan Pavlov, a RussianRead MoreThe Theory Of Classical Conditioning1129 Words   |  5 PagesIn this assignment I will be looking at the Behaviourist perspective with Ivan Pavlov’s (1902) theory about classical conditioning. I will be discussing how I have used human development and learning perspectives in my placement to support young people in their personal and social development with providing a case study about them. I will be writing about how the theory demonstrates effective youth and community work practice including the five pillars of youth work. Behaviourists look at behaviourRead MoreThe Theory Of Classical Conditioning1360 Words   |  6 PagesIs it possible to rouse fear from a stimulus that at first caused no such response? Classical conditioning is a type of learning where a response is produced from combining a conditioned stimulus with an unconditioned stimulus to produce an unconditioned response. Ivan Pavlov did a famous study, pairing the sound of a bell with food to produce salivation. After a while, just the sound alone would produce salivation. â€Å"Little Albert†, an infant that belonged to a wet nurse at the Harriet Lane HomeRead MoreTheory of Classical Conditioning1051 Words   |  4 PagesClassical Conditioning Introduction In psychology, there are number of theories and ideas which are used to influence the way someone reacts to particular events. In the case of classical conditioning, these ideas have been utilized to create short and long term transformations about how someone sees and reacts to the world around them. To fully understand how this is taking place requires examining these techniques and the way they are influencing behavior. This will be accomplished by studyingRead MoreThe Theory Of Classical Conditioning1202 Words   |  5 PagesIn this essay the ways in which classical conditioning principals have been used to treat problem behaviours in humans will be discussed. Firstly the findings of Ivan Pavlov’s research experiment on classical conditioning will be explained. Then a number of his basic principals that include extinction, spontaneous recovery, stimulus generalisation and acquisition will be explored. Finally, the use of behavioural therapy in treating problem behaviours, specifically in relation to systematic desensitisationRead MoreThe Theory Of Classical Conditioning1070 Words   |  5 Pages(1929) and Watson and Rayner (1920) contributed to the theory of classical conditioning. Classical conditioning argues behaviour is learned through the continued pairing of a stimulus that creates a response. This can be a fear response as identified by Watson and Rayner (1920) where a healthy eleven-month-old boy was conditioned to feel fear when he saw a fluffy white toy. This fear extended to any fluffy white object. Operant conditioning theory was developed through the findings of Skinner (1938)Read MoreThe Theory Of Classical Conditioning1222 Words   |  5 Pagesexperienced. Although Harlow has found this theory, Ivan Pavlov experimented with dogs and discovered classical conditioning. Classical conditioning can show how attitudes are formed and changed, how and when attitudes influence behavior, and how we change attitudes and behavior. Classical conditioning is basically learning through association, which induces involuntary or automatic responses to certain stimuli. A famous example is Pavlov’s dogs, before conditioning the dogs would salivate (UCR) when meatRead MoreThe Theory Of Classical Conditioning994 Words   |  4 Pagestransfer persist, although with a certain loss in the intensity of the reaction, for a longer period than one month.† The data reported in this paper definitely supports this conclusion. The purpose of this experiment was to test the theory of classical conditioning as well as transfer (stimulus generalization); and to see if they would be able to successfully condition an emotional response of fear. When this experiment began, Little Albert was 11 months and 3 days old. Watson and Rayner exposedRead MoreThe Theory Of Classical Conditioning Theory Essay712 Words   |  3 Pagesattachment theory is a psychological, an ethological and an evolutionary theory that is concerned with relationships between humans, specifically between mother and infant. An infant has to develop a relationship with at least one of their primary caregivers for them to develop socially and emotionally. This essay will look at evaluating the theories of Ivan Pavlov, John B Watson, Edward Thorndike, BF Skinner, John Bowlby (1958), and Mary Anisworth (1979) Two important learning theories of behavioristRead MoreThe Theory Of Classical Conditioning1824 Words   |  8 PagesClassical conditioning The first theory of learning is called classical conditioning and was developed by Ivan Pavlov a Russian physiologist. He started working with dogs to investigate their digestive system, they were ties to a harness and Pavlov added monitors to their stomachs and mouths to measure the rate of saliva produced. He found out that when a lab assistant came in to give the dog food before the dog tasting the food it started to produce saliva, saliva is a reflex response and Pavlov

Edgar Allen Poe wrote the short story “The Masque of the...

Edgar Allen Poe wrote the short story â€Å"The Masque of the Red Death† in 1842. While only one character is actually named, Prince Prospero, the story builds apprehension just based on the descriptions and not on dialogue. The narrator is never named and it is a mystery as to this person’s involvement in the story. The ambiguousness of the narrator also helps build the drama throughout the story. â€Å"The Masque of the Red Death† tells the story of a group of wealthy people who are trying to ignore and separate themselves from a terrible disease that is sweeping across their country. The disease is swift and brutal and can cause death within 30 minutes. The people infected weep blood from the pores on their faces and bodies, which causes a†¦show more content†¦The abbey is referred to as a Castellated Abbey that feels gothic, dark, and foreboding; which also helps set the mood for the story. Symbolism is used to set the tone for the story as well. The so-called â€Å"Red Death† (Poe 516) is a clear reference to the black plague that killed so many people. Poe changes the color of the plague and some of the details but the symmetry is undeniable. The way Poe describes the blood that symbolizes the plague as coming from the pores on the face, but not flowing grotesquely, produces a powerful image. Inside the abbey, there are seven rooms. Each of the areas is themed in a different color. The rooms lead one into another and have stained glass windows that match the color of the rooms. Oddly, though, the windows are set in the corridor and not facing outside which creates more of a dramatic effect. The rooms start at blue, then purple, green, orange, white, violet, and lastly, black. The different spaces can symbolize the different stages of life with the beginning starting with blue; purple is the color of royalty, green symbolizing spring or youth, and finishing with black symbolizing the end or death. To make his point clea rer and more dramatic, Poe had the stained glass windows in the last room be scarlet instead of black. All theShow MoreRelatedEssay on The Masque of the Red Death: Symbolism1419 Words   |  6 PagesThe author, Edgar Allan Poe, using illusion or misdirection keeps the reader is suspense throughout this story called The Masque of the Red Death. Symbolism such as the colored rooms, the impressive clock, the feeling of celebration being at a party all makes this story feel like a fairytale. Poe used this fairytale style and converts it into a nightmare in disguise. In the Masque of the Red Death, the first sentence, The Red Death had long devastated the country, sets the tone for the whole

Memory Lab Essay Example For Students

Memory Lab Essay The purpose of the memory lab was to determine which environments are most suitable for memory retention. The participants of this experiment were the students enrolled in our GSC 101 physical science class. Ages ranged from 18years of age to possibly 50. Of these participants we had a wide range of educational majors, ethnical background, and genders. All participants were required to submit a list of thirty common words to be used in the experiment. The testing procedures started at approximately 8:00 p.m. every Tuesday night in class. At this time the teacher would hand each student a list of thirty words face down on the desk (from the lists required of each student). Each participant was given two minutes to study the list followed by a one-minute intermission. After the intermission, each student was given as much time as needed to recall and write down the word list of that particular night. However, each participant was required to stop after they could no longer recall the w ords easily. The variables in our memory experiment were repetitions, time, colors, smells, and sounds. Our first variable was repetition. In this part of the experiment each participant was given a list of thirty words with two minutes to study and a one-minute intermission. This lab was repeated four times with the same list of words; each attempt with the same constants (study time, intermission time, and word list). The purpose of this lab was to record the effects of accuracy produced by repetitions. The second variable was time. Using the same list of words from the previous week (repetition lab), the participants were required to recall the list of words without studying them to record the effects of lapse time. This same procedure was used the following week. Again, requiring the participants to recall the list without seeing it first. The effects of color was our next variable. This was achieved by printing three different word lists on three different colors of paper. Yellow, green, and pink were the colors selected by the professor to avoid biasness. This variable was used to determine if colors had any effect on memory retention. All other variables were printed on plain white paper. The effects of smell on memory retention were also used. This procedure was accomplished using four different word lists and cotton balls, one for each student, with perfumes of gardenia, lavender, juniper, and herbal mist. Like the colors, the professor also chose the perfumes. Again, each student had the same time constants. Our last variable was sound. Slow classical, fast classical, rock, and music with words were used to record the effects of each on memory retention. The volume at which the music was played was kept the same throughout the entire sound lab. Each sound was used in conjunction with a new word list. As before, the music selection was determine by the professor. The results of the five variables are as follows. Repetitions had the best results after the second att empt. The first attempt had a positive overall out come. The third attempt revealed a declined retention as did the forth. Week one of the time variable resulted in a decline in memory retention. After two weeks of time lapse effected the ability to recall the word list decreased yet again. The color lab produced strong positive result using green paper and a close second with yellow. Using the color pink resulted in a decline of memory retention. Of the different smells used, gardenia had the most positive effect. Lavender also had a positive effect on retention. Declination of retention was apparent with the herbal mist perfume and continued to deteriorate with use of juniper. Listening to slow classical music while studying had the best results in the sound lab. Classical music with a faster tempo also showed positive results. Rock and music with words had a comparably negative effect. .u507a8c260a0bf2d08edf52e0298266ef , .u507a8c260a0bf2d08edf52e0298266ef .postImageUrl , .u507a8c260a0bf2d08edf52e0298266ef .centered-text-area { min-height: 80px; position: relative; } .u507a8c260a0bf2d08edf52e0298266ef , .u507a8c260a0bf2d08edf52e0298266ef:hover , .u507a8c260a0bf2d08edf52e0298266ef:visited , .u507a8c260a0bf2d08edf52e0298266ef:active { border:0!important; } .u507a8c260a0bf2d08edf52e0298266ef .clearfix:after { content: ""; display: table; clear: both; } .u507a8c260a0bf2d08edf52e0298266ef { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u507a8c260a0bf2d08edf52e0298266ef:active , .u507a8c260a0bf2d08edf52e0298266ef:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u507a8c260a0bf2d08edf52e0298266ef .centered-text-area { width: 100%; position: relative ; } .u507a8c260a0bf2d08edf52e0298266ef .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u507a8c260a0bf2d08edf52e0298266ef .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u507a8c260a0bf2d08edf52e0298266ef .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u507a8c260a0bf2d08edf52e0298266ef:hover .ctaButton { background-color: #34495E!important; } .u507a8c260a0bf2d08edf52e0298266ef .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u507a8c260a0bf2d08edf52e0298266ef .u507a8c260a0bf2d08edf52e0298266ef-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u507a8c260a0bf2d08edf52e0298266ef:after { content: ""; display: block; clear: both; } READ: Education in the 21st Century EssayMy personal opinion is that of all the variables, music such as rock and music with words was most distracting. Of all the labs the repetitions gave me the best results. I also attribute word association to some of that success. Another underlying factor would be metal awareness. Some days I had more sleep than other days, which may have affected my concentration level. I do realize that these effects are taken into consideration. Due to facilities and time, many underlying variable were not possible to isolate.In conclusion, this lab was useful to help hone my own study habits. Repetitions after a second time prove to be a waste of time. Extended periods of time between studying and recalling information studied can have negative effects. The color lab shows that I should consider repainting my study room green. Smells can actually hinder my memory retention and I should choose them wisely. The results with music help explain why I dont get anything accomplished when I listen to my favorite rock group while studying. Bibliography: