Money SupplyMoney Supply

Money SupplyMoney Supply

inin

Hong KongHong Kong

Credit CreationCredit Creation

&&

Bank MultiplierBank Multiplier

Money Supply in Hong KongMoney Supply in Hong Kong

Saving Deposits

in LB

Deposits

in DTC

TimeDepositsin LB

Depositsin RLB Chequeof

Demand Deposit

Two Main Functions of Two Main Functions of MoneyMoney

• Medium of ExchangeMedium of Exchange

• Store of ValueStore of Value

Chequeof

Demand Deposit

Medium of Medium of ExchangeExchange

M1

Saving & TimeDeposits

in LB

Store of Store of ValueValue

M1

M2

Depositsin

RLB & DTC

Also Store Also Store of Valueof Value

M3 M2M2

Money Supply in Hong KongMoney Supply in Hong Kong

• M1M1– emphasizes the function of medium of exchange

– includes the coins & notes in the hand of the public and demand deposits in LB.

• M2M2– emphasizes the function of store of value

– includes M1 and Saving & Time Deposits in LB.

• M3M3– also emphasizes the function of store of value

– includes M2 and Deposits in RLB and DTC.

M1M1

•Notes & coins in hands of publicNotes & coins in hands of public•Demand deposits with LBDemand deposits with LB

MM22

•M1M1•Saving and Time Deposit with LBSaving and Time Deposit with LB•Negotiable certificates of deposit issued by LBNegotiable certificates of deposit issued by LB

MM33

•M2M2•Time Deposit with RLB & DTCTime Deposit with RLB & DTC•Negotiable certificates of deposit issued by RLB & DTCNegotiable certificates of deposit issued by RLB & DTC

N otes & co in sin h an d s o f

p u b lic

D em an d D ep os itsw ith L B

M 1 N eg otiab le ce rt ifica teso f d ep os it

is su ed b y L B

S avin g & T im eD ep os its w ith L B

M 2Tim e D ep os its

w ith R L B & D TCN eg otiab le ce rt ifica tes

o f d ep os it is su edb y R L B & D TC

M 3

P.C. Ed. 1996-97Major Economics

• Designed by• Eric Leung

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