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Cake day: August 25th, 2024

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  • The money supply grows because banks are only forced to keep some of their deposits as reserves. Everything else can be lend away. The formula for the amount of money they create (money multiplier) is as follows:

    a = physical currency/bank deposits w = reserves/deposit accounts MM = 1+a/w+a

    You can interprete w as the rate of reserves. So if we simplify the equation by assuming theres no cash it becomes:

    MM = 1/w

    So if the reserve ratio is 0.1, the MM would be 10, meaning that the money supply will be 10 times bigger than the monetary base (cash + reserves).










  • You do you, but it’s better if everyone donates a bit of money to a lot of projects than donating a ton of money to a single project. It’s not like a single individual with a normal salary could fund a project alone anyways.

    Let’s suppose that 10 people have 10 dollars to give each, and there are 4 projects which they all use: Project A is the most important for 7 people, so they recieve $70. Then comes project B with $20 and C with $10. Project D gets no donations.

    But if we ponderate them by average importance it would be: A=0.5, B=0.3, C=0.15 and D=0.05. If they had split their donations, the allocation of funding would have been way more efficient.