Types of Computers: An Overview

Types of Computers: An Overview A computer is a programmable machine. It accepts information in the form of digitalized data and manipulates it for some result based on a program or sequence of instructions on how the data is to be processed. It consists of at least one processing element, typically a central processing unit (CPU) and some form of memory. The processing element carries out arithmetic and logic operations, and a sequencing and control unit that can change the order of operations based on stored information. Computer History: The first use of the word computer was recorded in 1613 in a book called The young mans gleanings by English writer Richard Braithwaite I have read the truest computer of Times, and the best Arithmetician that ever breathed, and he reduced thy days into a short number. It referred to a person who carried out calculations, or computations, and the word continued with the same meaning until the middle of the 20th century. From the end of the 19th century the word began to take on its more familiar meaning, a machine that carries out computations. Computer Types: Computers are also categorized on the basis of physical structures and the purpose of their use. Based on Capacity, speed and reliability they can be divided into four categories of computers: Microcomputer: A small, single-user computer based on a microprocessor. Minicomputer: A multi-user computer capable of supporting up to hundreds of users simultaneously. Mainframe: A powerful multi-user computer capable of supporting many hundreds or thousands of users simultaneously. Supercomputer: An extremely fast computer that can perform hundreds of millions of instructions per second. 2. MICROCOMPUTER A microcomputer is a small, relatively inexpensive computer with a microprocessor as its central processing unit (CPU). It includes a microprocessor, memory, and input/output (I/O) facilities. Microcomputers became popular in the 1970s and 80s with the advent of increasingly powerful microprocessors. Microcomputer or personal computer can be defined as a small, relatively inexpensive computer designed for an individual user. Businesses use microcomputers for word processing, accounting, desktop publishing, and for running spread sheet and database management applications. At home, the most popular use for microcomputers is for playing games and recently for surfing the Internet. The characteristics of a microcomputer are Monitors, keyboards and other devices for input and output may be integrated or separate. Computer memory in the form of RAM, and at least one other less volatile, memory storage device are usually combined with the CPU on a system bus in one unit. Other devices that make up a complete microcomputer system include batteries, a power supply unit, a keyboard and various input/output devices used to convey information to and from a human operator (printers, monitors, human interface devices). Microcomputers are designed to serve only one user at a time, although they can often be modified with software or hardware to concurrently serve more than one user. Microcomputers fit well on or under desks or tables, so that they are within easy access of users. Bigger computers like minicomputers, mainframes, and supercomputers take up large cabinets or even dedicated rooms. Actual microcomputer can be generally classified by size and chassis / case. The chassis or case is the metal frame that serves as the structural support for electronic components. Every computer system requires at least one chassis to house the circuit boards and wiring. The chassis also contains slots for expansion boards. If you want to insert more boards than there are slots, you will need an expansion chassis, which provides additional slots. There are two basic flavours of chassis designs-desktop models and tower models-but there are many variations on these two basic types. Then come the portable computers that are computers small enough to carry. Portable computers include notebook and subnotebook computers, hand-held computers, palmtops, and PDAs. Tower model The term refers to a computer in which the power supply, motherboard, and mass storage devices are stacked on top of each other in a cabinet. This is in contrast to desktop models, in which these components are housed in a more compact box. The main advantage of tower models is that there are fewer space constraints, which makes installation of additional storage devices easier. Desktop model A computer designed to fit comfortably on top of a desk, typically with the monitor sitting on top of the computer. Desktop model computers are broad and low, whereas tower model computers are narrow and tall. Because of their shape, desktop model computers are generally limited to three internal mass storage devices. Desktop models designed to be very small are sometimes referred to as slim line models. Notebook computer Notebook is extremely lightweight personal computer. Notebook computers typically weigh less than 6 pounds and are small enough to fit easily in a briefcase. Aside from size, the principal difference between a notebook computer and a personal computer is the display screen. Notebook computers use a variety of techniques, known as flat-panel technologies, to produce a lightweight and non-bulky display screen. The quality of notebook display screens varies considerably. In terms of computing power, modern notebook computers are nearly equivalent to personal computers. They have the same CPUs, memory capacity, and disk drives. However, all this power in a small package is expensive. Notebook computers cost about twice as much as equivalent regular-sized computers. Notebook computers come with battery packs that enable you to run them without plugging them in. However, the batteries need to be recharged every few hours. Laptop computer A small, portable computer small enough that it can sit on your lap. Nowadays, laptop computers are more frequently called notebook computers. Subnotebook computer A portable computer that is slightly lighter and smaller than a full-sized notebook computer. Typically, subnotebook computers have a smaller keyboard and screen, but are otherwise equivalent to notebook computers. Hand-held computer A portable computer that is small enough to be held in ones hand. Although extremely convenient to carry, handheld computers have not replaced notebook computers because of their small keyboards and screens. The most popular hand-held computers are those that are specifically designed to provide PIM (personal information manager) functions, such as a calendar and address book. Some manufacturers are trying to solve the small keyboard problem by replacing the keyboard with an electronic pen. However, these pen-based devices rely on handwriting recognition technologies, which are still in their infancy. Hand-held computers are also called PDAs, palmtops and pocket computers. Palmtop Palmtop is small computer that literally fits in your palm. Compared to full-size computers, palmtops are severely limited, but they are practical for certain functions such as phone books and calendars. Palmtops that use a pen rather than a keyboard for input are often called hand-held computers or PDAs. Because of their small size, most palmtop computers do not include disk drives. However, many contain PCMCIA slots in which you can insert disk drives, modems, memory, and other devices. Palmtops are also called PDAs, hand-held computers and pocket computers. PDA PDA is short for personal digital assistant, a handheld device that combines computing, telephone/fax, and networking features. A typical PDA can function as a cellular phone, fax sender, and personal organizer. Unlike portable computers, most PDAs are pen-based, using a stylus rather than a keyboard for input. This means that they also incorporate handwriting recognition features. Some PDAs can also react to voice input by using voice recognition technologies. The field of PDA was pioneered by Apple Computer, which introduced the Newton Message Pad in 1993. Shortly thereafter, several other manufacturers offered similar products. To date, PDAs have had only modest success in the marketplace, due to their high price tags and limited applications. However, many experts believe that PDAs will eventually become common gadgets. PDAs are also called palmtops, hand-held computers and pocket computers. 3. MINICOMPUTER Another type of computer is Micro Computer which is design to support more than one user at a time but it can be used by one person at a time. It is a computer of a size intermediate between a microcomputer and a mainframe computer and includes a microprocessor, memory, input and output facility and it comes equipped with at least one type of data storage, usually RAM. Typically, mini computers have been stand-alone computers sold to small and mid-size businesses for general business applications and to large enterprises for department-level operations. . Mini computers were designed for control, instrumentation, human interaction, and communication switching as distinct from calculation and record keeping. They have great storage capacity and work at a high speed rate. It is often use in place where several people have to work at the same time, so it let many users use data at the same time without any inconvenient. Mini computers are not only used in organization for work but many of mini computers are also used as personal computer. It has a large cheap array of silicon logic gate which allows utility programs and self-booting kernel to be stored within microcomputers. These stored programs let the minicomputer to automatically load further more complex software from external storage device without the user intervention. The Minicomputers were first built in in 1960s and they immediately became a huge success as 40,000 of the minicomputer systems were immediately sold of making the computers hugely available to the general public. With such a successful market possibility many companies stepped in to venture in the minicomputer market. The most successful among these two hundred companies was DEC that launched the minicomputer models PDP-11 and VAX 11/780. Some significant characteristics and historical facts about the mini computer system have been summarized as follows: They are much smaller in size than the mainframe computer systems. As such they do not occupy an entire room but usually occupy space similar in size to that of a standard refrigerator. They are much less expensive than the mainframes. Their invention was possible because of the invention of core memory technologies and transistors. Minicomputers can give parallel access to up to 100 users. Hence they were used in places such as business organizations for maintaining billings and finances. Some of the very first companies to manufacture the minicomputer systems were Hewlett Packard, DEC and Data General. A few models of minicomputers which have been a marked success over the years are: DEC VAX series and PDP series Hewlett Packard HP3000 series SDS,SDS-92 Prime Computers, Prime 50 Series Norsk Data, Nord-1, Nord-10, Nord-100 IBM Midrange Computers Control Data Corporations CDC 160A, CDC-1700 Data General Nova Honeywell-Bull Level 6/DPS Level6/DPS 6000 series Minicomputers have eventually evolved in to microcomputers. With the launch of microcomputers, the public have Had a greater access to the advantage of incorporating computers in the daily stride of their lives. 4. MAINFRAME COMPUTER In another hand we have the Mainframe Computer which is quite expensive than the Mini computer. In comparison the mainframe computer perform better than the mini computer, it can process data at a very high speed rate, for example, millions of instruction per second and Compared to a typical PC, mainframes commonly have hundreds to thousands of times as much data storage online, and can access it much faster. They contain a large number of self-maintenance features, including built-in security features and high data handling capacity. Because of mainframes ability to handle high level data transactions they are used by the biggest firms in almost all the industry such as banks, government agencies and organizations which need to store great volume of complex and important data at a high security level, which means that this is the most secure than other type of computer. Mainframes are designed to handle very high volume input and output and emphasize throughput computing. This type of computer can work for long period without being interrupted, they are reliable. It can run multiple different instance of different operating system and can handle the work of many users at the same time. The term RAS (reliability, availability and serviceability) is a defining characteristic of the mainframe computer. Test, development, training, and production workload for applications and databases can run on a single machine, except for extremely large demands where the capacity of one machine might be limiting. They are usually protected by multiple levels of security and power backup, both internal and external. Among the self-protection measures commonly found in mainframes are an enhanced heat-protection mechanism. Because these computers run all day along with 24x7x365 ability, a large amount of heat generated must be expelled. The fans in mainframe computers are among the most efficient helping in keeping the data centers cool. Features They are huge computers installed in space centers, nuclear power stations etc. They are used for performing complex mathematical calculations. Only scientists and mathematicians can operate them. They are having huge memories tremendous processing speed. They are used for weather forecasting, animation graphics Mainframes run multiple sessions, and with high reliability. Companies can run their IT operations for years without problems or interruptions with minimum down time. Administration is very easy due to the fact that all applications layers are monitored in one Server. A central computer alone can replace dozens or hundreds of smaller PCs, reducing management and administrative costs while providing a much better scalability and reliability. Mainframes can run more than one operating system at once, which allows companies to run multiple sessions with a super-fast speed, high reliability, and high secure. 5. SUPERCOMPUTER Supercomputer is a broad term for one of the fastest computers currently available. Supercomputers are very expensive and are employed for specialized applications that require immense amounts of mathematical calculations (number crunching). For example, weather forecasting requires a supercomputer. Other uses of supercomputers scientific simulations, (animated) graphics, fluid dynamic calculations, nuclear energy research, electronic design, and analysis of geological data (e.g. in petrochemical prospecting). Perhaps the best known supercomputer manufacturer is Cray Research. Approaches to supercomputer architecture have taken dramatic turns since the earliest systems were introduced in the 1960s. Early supercomputer architectures pioneered by Seymour Cray relied on compact innovative designs and local parallelism to achieve superior computational peak performance. However, in time the demand for increased computational power ushered in the age of massively parallel systems. Here are some examples of supercomputer: IBM Roadrunner Cray Jaguar Tianhe-IA Fujitsu K computer IBM Sequoia Cray Titan Advantages of supercomputer The primary advantage that supercomputers offer is decreased processing time. Computer speed is commonly measured in floating point operations, or FLOPS. Average home computers can perform up to a hundred billion of these operations per second, or 100 gigaflops. Supercomputers, however, are tens of thousands of times faster, meaning that calculations that would take your home computer hours or days can be solved by a supercomputer in a matter of seconds. Supercomputers are usually used to tackle large, real-world problems that would be too time consuming on regular computers. For example, weather forecasters use supercomputers to create models of the weather and to forecast the weather. Obviously, forecasts have to be made in a timely manner to make them useful so the more powerful the computer the better. Only supercomputers have the ability to perform these calculations in a timely fashion. One of the sayings of computing is that the higher the technology, the more trivial the application and the most powerful computers in the world are used by digital effects/computer animation companies. The sheer processing power of supercomputers means that they can be used to do things that ordinary computers simply couldnt handle. Supercomputers have also permitted great strides in filmmaking and special effects. Disadvantages of supercomputer There have no great difference between mainframe computers because like the mainframe it takes up a large space and cost very high. It requires trained staff to can handle and use the supercomputer and it may only be good for specific application. It is high power consumption, it use a lot of electricity, for instance, about millions Rupees in a year. Other disadvantage is that supercomputers require massive external storage drives whose bandwidth is fast enough to accommodate the data being analyzed and produced. If storage and bandwidth cant keep up with the data flow, the supercomputer will not be able to work at its full capacity. Unlike ordinary desktop computers that may finish calculating a problem in a few minutes or overnight, supercomputers work on tasks that require intensive calculations which can take extremely long periods to complete. For example, a supercomputer could spend months performing calculations to support research on climate change or to help cure a disease, presenting a disadvantage to people who are in a hurry for quick results. 6. CONCLUSION After all we can say that computer has made his way since 19xx. It has begun with the microcomputer which consisted of simple technology. Then we have the minicomputer which becomes more and more personal and sophisticated for users. It makes great progress when the mainframe computer comes in 19xx (put the date). It comes with more performance and more memory with high security level. Their process increased more than 100 times and finally when the famous supercomputer comes which is 1000 times more powerful than the predecessor. And nowadays with the great evolution we have four type of computer.

Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization Essay

Ethical Dilemma Introduction                   Decisions are bound to be made on a daily basis whether on an individual or corporate level. The actions taken after the decision may lead to positive or negative outcomes. Ethics, therefore, is an important aspect that guides decision making both at a personal level and as a company. Ethics is described as the accepted moral values within a society or a given organization(Hoffman, Frederick, & Shwartz, 2013). It gives organizations and individual the outline of accepted practices and guides the decision making process to yield the preferable results without causing harm to others. Decisions define the success of any given organization because they are made on daily a basis, ranging from the top level management decisions to the support staff routine decision making. Ethical standards are important as they ensure all the stakeholders act sensibly. It is because of this reason that ethical standards play a crucial role in the success of an organization.                   One of the common ethical issues at an organizational level are the issues concerning the management of human resources. I have witnessed a human resource practitioner faced with an ethical dilemma concerning matters of recruitment, selection, fair working conditions, and remuneration(Seglin, 2011). The manager in charge of hiring and managing the human resources of any given organization face tough decision while performing their duties. Under the situation, I experienced, thehuman resource manager was put under pressure by the finance department to reduce the cost of labor for the company to realize sustainable profits. To achieve the set profit target of the company, the human resource manager had the alternative of hiring individual with low qualifications, or fire some of the employees to reduce the wage bill, or significantly reduce the salaries and benefits the employees are getting from the firm.                   From the above situation, the personnel manager is under an ethical dilemma situation. This is because both decisions and actions that he would take will have both positive and negative outcomes. First of all, it is ethical for the human resource manager to respect the directives from the senior management and serve the interest of the company to increase profits(Crane & Matten, 2012). However, by complying with these instructions will cause some employees to lose their jobs without sufficient or convincing reasons. This infringes the rights of the employees by terminating them without good reasons. If he employees with fewer skilled workers, the company will have a low wage bill, but the quality of work will be compromised and hence put the company at stake. Secondly, it is ethical for the human resource manager to protect the employees from termination without valid explanations(Seglin, 2011). Therefore, the manager is faced with two choices that both seem morally correct, but the outcomes have ethical considerations too. However, the manager was left with no choice and decided to terminate some employees, reduce salaries and employee benefits for the remaining workers.                   The stakeholders affected by the decision of the human resource manager include the management, the employees, both the fired and those still working, and the clients of the organization. The management is affected because the company is understaffed and the available resources underutilized. This means most of the resources go to waste and hence increasing losses made by the firm in the long run. By hiring low skilled personnel translates to low wages as directed by the management(Hoffman, Frederick, & Shwartz, 2013). However, the employees will give poor work quality due to lack of required expertise and hence the management may lose business to their close market rivals.                   The employees who are fired are adversely affected due to the loss of their source of lively hood. It is also against their right, to terminate their employment with no valid reason. Such individuals’ lives are changed and it affects their families too, if they were the main providers(Crane & Matten, 2012). The workers who remain on the job are also affected adversely due to the reduction in their number. They have to perform extra work and take extra time to finish what the terminated personnel used to do. With time such employees lose job morale due to low pay and long hours of work.                   Clients of the firm will also be affected by this decision because of the poor quality of work. Termination of some employees will make the organization to be understaffed and hence unable to meet the growing demand for their products. This affects the final consumers due to the forces of demand and supply. Hiring low skilled employees has a direct impact on the quality of work output(Seglin, 2011). The consumers will, therefore, receive substandard products. This reduces the utility clients derive from consuming the services and products of the firm.                   What would be considered the right outcome of the human resource manager’s decision, is the reduction of labor cost. Some of the things that constitute to high labor cost are high cost of wages and salaries, high number of employees, good working conditions, and employee benefits. By terminating the employment of some employees, the wage bill of the company reduces(Hoffman, Frederick, & Shwartz, 2013). The management will also offer lower salaries to less skilled employs and the reduction in the remuneration of the existing employees also reduce the labor cost. Therefore, the management would consider this outcome to be ‘right’ according to their expectations.                   However, it would also be considered wrong for the human resource boss to terminate employment agreements, reduce salaries and benefits, and hire less skilled. It is unethical for any employer to terminate the employment agreements of his/her workers without valid reasons. The process of selecting who is to be fired is also faced with ethical considerations and bias may prevail the process(Hoffman, Frederick, & Shwartz, 2013). Employees are supposed to be remunerated in accordance with their contribution to the company. Underpaying the employee for the benefit of the company is considered unethical and wrong. By reducing the number of employees in an organization makes the remaining workers work overtime. This is unethical as it denies them the crucial time to balance work and family. It is going against the rights of the workers by adding them more tasks without changing their terms of payment.                   The human resource manager made his decision based on the ethical principles of the firm. His decision to implement the directive of the management concerning cutting on labor cost, was influenced by the ethical principal that requires all the employees to respect the management and serve the interest of the company and not their own interest(Crane & Matten, 2012). If he would not implement the plan, then the human resource manager will be considered to have behaved in contempt of his seniors.The management of the firm spearhead the interest of the company and communicate it down to the least of ranks among the employees. In this case the firm’s interest is to reduce the cost incurred on manpower and hence increase the profit margins. As much as this decision when put to action affects livelihood of employees and the success of the firm, the human resource manager has to follow the code of ethics that requires him to respect decisions from persons at a higher rank than him.                   Biases also played a major role in influencing the decision and action taken by the personnel manager. He took the decision in favor of the management since he has a lower rank to them. By favoring them, he reduces the risk of him being questioned or even fired. If he does not be biased in his decision then he would not have served any of the parties due to the natter at hand being an ethical dilemma(Hoffman, Frederick, & Shwartz, 2013). This means that both the alternatives he had seemed morally right. It is ethical for him to protect employees from termination and remuneration reduction, because the company may incur high losses in the long run if that action is taken. However, it is also his moral responsibility to execute the plans and instructions of his colleagues in senior positions than him. Therefore, his action is justifiable as ethical. It is because of this dilemma that the manager had to apply bias for him to find a way out. This bias is mai nly as a result of seniority of management over the personnel manager.                   To address the ethical dilemma at hand, it would be wise for the human resource manager and the management to discuss the issue at hand. Then they organize a forum with both the management and the employees over the cost of labor. During the talks, the personnel manager will have a chance to explain to the management why the human resources are the most important resources for the success of the firm(Seglin, 2011). He would advise the top managers on other methods of costs reduction other than termination and pay cut. Measures such as doing massive advertising and publicity would increase the sales margin of the company. This is directly proportional to profits and it can be adopted instead of firing employees. The company may also invest more in the employees to increase their efficiency and skills. By doing productivity will go high and they will produce quality products and services that would more potential customers and increase sales turnouts. Conclusion                   Human beings and organizations are faced with situations that require decision making on a daily basis. Ethics is those values that are used to distinguish between right and wrong in an organization or a society. The decision made always have consequences and the consequences are judged based on the set moral values. Human resource practitioners are faced with ethical dilemmas in their daily responsibilities, that is; recruitment, selection, training, and termination. During this decisions and actions several stakeholders are affected. The management, the employees, and the clients are all affected by the decisions of the human resource manager. At times it is difficult to consider what is right and what is wrong due to both outcomes seeming morally correct. This situation is called an ethical dilemma. To overcome such situations all stakeholders of a given organization should frequently have meetings and talks to update the code of ethics and discuss so lutions to difficult ethical situations. References Crane, A., & Matten, D. (2012). Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. New York C: Oxford University Press. Hoffman, M., Frederick, R., & Shwartz, M. (2013). Business Ethics: Readings and Cases in Corporate Morality. New York: Wiley-Blackwell. Seglin, J. (2011). The Good, the Bad, and Your Business: Choosing Right When Ethical Dilemmas Pull You Apart . Boston: Wiley Publishers. Source document

Introduction to the Reserve Ratio

The reserve ratio is the fraction of total deposits that a bank keeps on hand as reserves (i.e. cash in the vault). Technically, the reserve ratio can also take the form of a required reserve ratio, or the fraction of deposits that a bank is required to keep on hand as reserves, or an excess reserve ratio, the fraction of total deposits that a bank chooses to keep as reserves above and beyond what it is required to hold. Now that weve explored the conceptual definition, lets look at a question related to the reserve ratio. Suppose the required reserve ratio is 0.2. If an extra $20 billion in reserves is injected into the banking system through an open market purchase of bonds, by how much can demand deposits increase? Would your answer be different if the required reserve ratio was 0.1? First, well examine what the required reserve ratio is. What Is the Reserve Ratio? The reserve ratio is the percentage of depositors bank balances that the banks have on hand. So if a bank has $10 million in deposits, and $1.5 million of those are currently in the bank, then the bank has a reserve ratio of 15%. In most countries, banks are required to keep a minimum percentage of deposits on hand, known as the required reserve ratio.This required reserve ratio is put in place to ensure that banks do not run out of cash on hand to meet the demand for withdrawals. What do the banks do with the money they dont keep on hand? They loan it out to other customers! Knowing this, we can figure out what happens when the money supply increases. When the Federal Reserve buys bonds on the open market, it buys those bonds from investors, increasing the amount of cash those investors hold. They can now do one of two things with the money: Put it in the bank.Use it to make a purchase (such as a consumer good, or a financial investment like a stock or bond) Its possible they could decide to put the money under their mattress or burn it, but generally, the money will either be spent or put into the bank. If every investor who sold a bond put her money in the bank, bank balances would initially increase by $20 billion dollars. Its likely that some of them will spend the money. When they spend the money, theyre essentially transferring the money to someone else. That someone else will now either put the money in the bank or spend it. Eventually, all of that 20 billion dollars will be put into the bank. So bank balances rise by $20 billion. If the reserve ratio is 20%, then the banks are required to keep $4 billion on hand. The other $16 billion they can loan out. What happens to that $16 billion the banks make in loans? Well, it is either put back into banks, or it is spent. But as before, eventually, the money has to find its way back to a bank. So bank balances rise by an additional $16 billion. Since the reserve ratio is 20%, the bank must hold onto $3.2 billion (20% of $16 billion). That leaves $12.8 billion available to be loaned out. Note that the $12.8 billion is 80% of $16 billion, and $16 billion is 80% of $20 billion. In the first period of the cycle, the bank could loan out 80% of $20 billion, in the second period of the cycle, the bank could loan out 80% of 80% of $20 billion, and so on. Thus the amount of money the bank can loan out in some period ​n of the cycle is given by: $20 billion * (80%)n where n represents what period we are in. To think of the problem more generally, we need to define a few variables: Variables Let A be the amount of money injected into the system (in our case, $20 billion dollars)Let r be the required reserve ratio (in our case 20%).Let T be the total amount the bank loans outAs above, n will represent the period we are in. So the amount the bank can lend out in any period is given by: A*(1-r)n This implies that the total amount the bank loans out is: T A*(1-r)1 A*(1-r)2 A*(1-r)3 ... for every period to infinity. Obviously, we cannot directly calculate the amount the bank loans out each period and sum them all together, as there are an infinite number of terms. However, from mathematics we know the following relationship holds for an infinite series: x1 x2 x3 x4 ... x / (1-x) Notice that in our equation each term is multiplied by A. If we pull that out as a common factor we have: T A[(1-r)1 (1-r)2 (1-r)3 ...] Notice that the terms in the square brackets are identical to our infinite series of x terms, with (1-r) replacing x. If we replace x with (1-r), then the series equals (1-r)/(1 - (1 - r)), which simplifies to 1/r - 1. So the total amount the bank loans out is: T A*(1/r - 1) So if A 20 billion and r 20%, then the total amount the bank loans out is: T $20 billion * (1/0.2 - 1) $80 billion. Recall that all the money that is loaned out is eventually put back into the bank. If we want to know how much total deposits go up, we also need to include the original $20 billion that was deposited in the bank. So the total increase is $100 billion dollars. We can represent the total increase in deposits (D) by the formula: D A T But since T A*(1/r - 1), we have after substitution: D A A*(1/r - 1) A*(1/r). So after all this complexity, we are left with the simple formula D A*(1/r). If our required reserve ratio were instead 0.1, total deposits would go up by $200 billion (D $20b * (1/0.1). With the simple formula D A*(1/r) we can quickly and easily determine what effect an open-market sale of bonds will have on the money supply.

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