The Money Supply Process - Lecture Notes

A collection of vocabulary flashcards derived from the lecture notes on the money supply process.

Federal Reserve System

The central banking system of the United States responsible for conducting monetary policy.

Monetary Base (MB)

The total amount of a currency in circulation and reserves held by the central bank.

T-accounts

Accounting tools used to represent financial transactions, showing the effects on assets and liabilities.

Multiple Deposit Creation

The process by which banks use the reserves they hold to create new money through lending.

Required Reserve Ratio (rr)

The fraction of deposits that a bank must hold as reserves and not lend out.

Money Multiplier (m)

A factor that quantifies the maximum amount of money that banks can create with each unit of reserves.

Open Market Operations

The buying and selling of government securities by the Federal Reserve to influence the money supply.

Float

A temporary net increase in the total amount of reserves in the banking system caused by the Federal Reserve's check-clearing process.

Excess Reserves

Reserves that banks hold over and above the required reserves, which can be used for new loans.

High-powered Money

Another term for the monetary base, which is critical in determining the money supply.