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9 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 deposits on reserve as vault cash and deposits 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 deposit 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 deposit with the Fed.
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Money multipier
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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.
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Monetary policy
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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)
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Open Market operations
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the buying and selling of government securities 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 charge for overnight loans of reserves to other banks
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