Economists Occasionally Speak of "Helicopter Money" as a Short-Hand Approach

question 6

Essay

Economists occasionally speak of "helicopter money" as a short-hand approach to explaining increases in the money supply. Suppose the Chairman of the Federal Reserve flies over the country in a helicopter dropping 10,000,000 in newly printed $100 bills (a total of $1 billion). By how much will the money supply increase if, holding everything else constant: a. all of the new bills are held by the public?
b. all of the new bills are deposited in banks that choose to hold 10 percent of their deposits as reserves (and no one in the economy holds any currency)?
c. all of the new bills are deposited in banks that practice 100-percent-reserve banking?
d. people in the economy hold half of their money as currency and half as deposits, while banks choose to hold 10 percent of their deposits as reserves?

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Definitions:

Exosystem

A term from ecological systems theory referring to external social settings that indirectly influence an individual’s development, such as parents' workplaces.

Vice President

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Ethology

The scientific study of animal behavior, often with a focus on behavior under natural conditions, and the understanding of behavior from an evolutionary perspective.

Biologically-Oriented

A perspective or approach that focuses on the biological or genetic factors in the study of organisms or behaviors.