Reference no: EM131344491

The late bank robber named Willie Sutton was once asked why he robbed banks. He answered: "That's where the money is." While this may have been true at one time, from the perspective of modern economists, Sutton is both right and wrong. He is wrong because the overwhelming majority of money in the economy is not in the form of currency sitting in vaults or drawers at banks, waiting for a robber to appear. Most money is in the form of bank accounts, which exist only as electronic records on computers. From a broader perspective, however, the bank robber was more right than he may have known. Banking is intimately interconnected with money and consequently, with the broader economy.

Money and Banking are compelling subjects, and warrant our full attention. These things are the lifeblood of the economy. We may intensely dislike the "wealthy banks" - but we cannot live without them and the vital functions they perform. Please watch this brief Mr. Clifford video on money creation:

https://www.youtube.com/watch?v=JG5c8nhR3LE

 Now with these things in mind, Please choose ONE of the following. Your response should be 300-500 words long:

1) Explain what will happen to the Money Multiplier process if there is an increase in the Reserve Requirement.

2) Why does expansionary monetary policy cause interest rates to drop?

3) There is a well-known economic model called the Phillips Curve. Using a discussion on expansion and contradiction policy, explain why one of these variables usually falls when the other rises.

Please include an APA reference.