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10 Cards in this Set
- Front
- Back
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Fractional reserve banking
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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.
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Required reserves
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The minimum balance that the Fed. requires a bank to hold in vault cash or on desposits with the Fed.
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Required reserve ratio
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The percentage of desposits that the Fed. Requires a bank to hold in vault cash or on desposit with the Fed.
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Excess reserves
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Potential loans balances held in vault cash or on deposits with the FED. in excess of required reserves
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Money multiplier
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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.
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Monetary policy
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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)
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Open Market operations
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THe buying and selling of government sucurties by the Federal Reserve system
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Discount Rate
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THe interest rate the Fed. Charges on loans of reserves to banks.
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Federal funds market
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A private market in which banks lend reserves to each other for less than 24 hours
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Federal funds rate
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The interest rate banks chargae for overnight loans of reserves to other banks
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