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10 Cards in this Set

  • Front
  • Back
Fractional reserve banking
A system in which banks keep only a percentage of their desposits of their deposits on reserve as vault cash and desposits at the Fed.
Required reserves
The minimum balance that the Fed. requires a bank to hold in vault cash or on desposits with the Fed.
Required reserve ratio
The percentage of desposits that the Fed. Requires a bank to hold in vault cash or on desposit with the Fed.
Excess reserves
Potential loans balances held in vault cash or on deposits with the FED. in excess of required reserves
Money multiplier
The maximum change in the moey supply (checkable desposits) due to an initial change in the excess reserves banks hold. The money multiplier is equal to 1 divided by the required reserve ratio.
Monetary policy
The Federal Reserve's use of open market operations, change in the discount rate, and changes in the required reserve ratio to change the money supply (M1)
Open Market operations
THe buying and selling of government sucurties by the Federal Reserve system
Discount Rate
THe interest rate the Fed. Charges on loans of reserves to banks.
Federal funds market
A private market in which banks lend reserves to each other for less than 24 hours
Federal funds rate
The interest rate banks chargae for overnight loans of reserves to other banks