unit 4 financial sector

respect

Nominal Interest Rate Formula

Real+Inflation

Real Interest Rate Formula

Nominal-Inflation

Reserve Ratio

Percentage of deposits that banks do not lend out in order to function

Money Multiplier Formula

1/ Reserve Ratio

Money Demand Shifters

Price level, income, technology, GDP

Monetary Policy

Actions done by the central bank in order to control the money supply

Money Supply Shifters

Reserve ratios, discount rate, open market operations

Discount Rate

Interest rate charged by central banks on loans given to commercial banks

Open Market Operations (OMO)

Central banks buying or selling governmental securities in order to influence the money supply, interest rates and economy

Required Reserves

Legal amount of money that a bank is required to hold from deposits (reserve ratio)

Excess Reserves

Extra funds held by banks that exceed the minimum legal level of required reserves

Demand Deposits

Funds held in checking accounts that are immediately accessible

Bonds

A financial asset representing a loan, paying a fixed interest rate to the purchaser