The banks in effect borrow cash and must pay it back; the short durations allow interest rates to be adjusted continually. When the repo notes come due the participating banks bid again. An increase in the quantity of notes offered at auction allows an increase in liquidity in the economy. A decrease has the contrary effect. The contracts are carried on the asset side of the European Central Bank's balance sheet and the resulting deposits in member banks are carried as a liability. In layman terms, the liability of the central bank is money, and an increase in deposits in member banks, carried as a liability by the central bank, means that more money has been put into the economy.[a] COUNT 5
QSN1 What happens when a lot of repo notes come due? ANS1 increase in liquidity in the economy QSN2 What happens whe not as many repo notes are coming due? ANS2 contrary effect QSN3 What happens when members increase their deposits? ANS3 more money has been put into the economy QSN4 What is a good way to boost the economy? ANS4 increase in deposits in member banks QSN5 Where are contracts recorded? ANS5 on the asset side of the European Central Bank's balance sheet