The Federal Reserve's Balance Sheet and the Money Supply Process

A collection of vocabulary flashcards based on concepts from Chapter 14 about the Federal Reserve's Balance Sheet and the Money Supply Process.

M1

A measure of the money supply that includes currency in circulation and checkable deposits.

Money Multiplier

A factor that quantifies the increase in the money supply resulting from an increase in bank reserves.

Monetary Base

The total amount of currency in circulation plus reserves held by banks.

Discount Loans

Loans that the Federal Reserve extends to commercial banks, usually at a higher interest rate.

Open Market Operations

The purchase and sale of government securities by the Fed to regulate the money supply.

Required Reserve Ratio

The percentage of checkable deposits that banks must hold as reserves, as mandated by the Fed.

Excess Reserves

Any reserves held by banks above the required minimum percentage.

Currency-to-Deposit Ratio (C/D)

The ratio of the public's holdings of currency to their checkable deposits.

Multiple Deposit Creation

The process through which banks can create more money by lending out a portion of deposits.

Federal Reserve (the Fed)

The central bank of the United States, responsible for regulating the monetary system.

Money Supply

The total amount of money available in an economy at a particular time.

Nonbanking Public

Households and firms that do not operate as banks and hold currency or demand deposits.

Bank Reserves

A portion of deposits that banks hold in cash or at the central bank, which can be used for withdrawals.

Time Deposits

Bank deposits that cannot be withdrawn for a specific period without penalty.

Checkable Deposits

Deposits in a bank account that can be withdrawn by checking.

Inflation Rates

The rate at which the general level of prices for goods and services is rising, which erodes purchasing power.

Interest Rates

The amount charged by lenders for borrowing money, usually expressed as a percentage of the principal.