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The Money-Creation Model: Graphic Illustration


  • Ching-chong Lai
  • Juin-jen Chang
  • Ming-ruey Kao


The authors propose a pedagogical apparatus embodying a solid microfoundation with emphasis on the public's choice between currency and demand deposits being an optimal decision. On the basis of the pedagogical exposition, the authors explain how money supply is related to the combined behaviors of the central bank, commercial banks, and the public.

Suggested Citation

  • Ching-chong Lai & Juin-jen Chang & Ming-ruey Kao, 2004. "The Money-Creation Model: Graphic Illustration," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(1), pages 79-88, January.
  • Handle: RePEc:taf:jeduce:v:35:y:2004:i:1:p:79-88
    DOI: 10.3200/JECE.35.1.79-88

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