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9 Cards in this Set

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Fractional reserve banking
A system in which banks keep only a percentage of their deposits on reserve as vault cash and deposits at the Fed.
Required reserves
The minimum balance that the Fed requires a bank to hold in vault cash or on deposit with the Fed.
Required reserve ratio
The percentage of desposits that the Fed requires a bank to hold in vault cash or on deposit with the Fed.
Money multipier
The maximum change in the money supply (checkable deposits) due to an intitial 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, changes 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 securities 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 charge for overnight loans of reserves to other banks