Studied by 4 people
Higher reserve ratios
________ mean lower monetary multipliers and therefore less creation of new checkable- deposit money via loans (and vice versa)
Monetary multiplier
________- Exists because the reserves and deposits lost by one bank become reserves of another bank.
Wahoo
Receiving cash as checkable deposits constitute claims that the depositors have against the assets of the ________ bank and thus are a new liability account.
Reserve ratio
________- The "specified percentage "of checkable- deposit liabilities that a commercial bank must keep as reserves.
excess reserves
A single commercial bank in a multibank banking system can lend only an amount equal to its initial pre- loan ________.
Balance sheet
________- A statement of assets and claims on assets that summarizes the financial position of the bank at a certain time.
commercial bank
When a(n) ________ buys government bonds from the public, new money is created.
Currency itself
________ serves as bank reserves so that the creation of checkable deposit money by banks (via their lending) is limited by the amount of currency reserves that the banks feel obligated, or are required by law, to keep.
federal reserve bank
Transaction 4: Depositing reserves in a(n) ________.
Deposit insurance
________ helps to prevent economic panics.
Federal funds rate
________- Interest paid on banks lending excess reserves to other banks on an overnight basis.
Fractional reserve banking system
Only a portion (fraction) of checkable deposits are backed up by cash in bank vaults or deposits at the central bank
Balance sheet
A statement of assets and claims on assets that summarizes the financial position of the bank at a certain time
Transaction 1
Creating a bank
Vault cash
Cash held by a bank
Transaction 2
Acquiring property + equipment
Transaction 3
Accepting deposits
Transaction 4
Depositing reserves in a federal reserve bank
Required reserves
An amount of funds equal to a specified percentage of the banks own deposit liabilities
Reserve ratio
The "specified percentage" of checkable-deposit liabilities that a commercial bank must keep as reserves
Transaction 5
Clearing a check drawn against the bank
Transaction 6
Granting a loan
Transaction 7
Buying government securities
The selling of government bonds to the public by a commercial bank-like the repayment of a loan
reduces the supply of money
Federal funds rate
Interest paid on banks lending excess reserves to other banks on an overnight basis
Monetary multiplier
Exists because the reserves and deposits lost by one bank become reserves of another bank
Fractional reserve banking system
Only a portion (fraction) of checkable deposits are backed up by cash in bank vaults or deposits at the central bank
Balance sheet
A statement of assets and claims on assets that summarizes the financial position of the bank at a certain time
Vault cash
Cash held by a bank
Required reserves
An amount of funds equal to a specified percentage of the bank’s own deposit liabilities
Reserve ratio
The “specified percentage” of checkable-deposit liabilities that a commercial bank must keep as reserves
Excess reserves
Actual reserves - required reserves
Federal funds rate
Interest paid on banks lending excess reserves to other banks on an overnight basis
Monetary multiplier
Exists because the reserves and deposits lost by one bank become reserves of another bank. It magnifies excess reserves into a larger creation of checkable-deposit money.
Note
Flashcard