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13 Cards in this Set
- Front
- Back
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1.What is the “fractional reserve banking system”? Why is it significant?
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P-G-7
a reserve requirement that is less than 100 percent of the checkable deposit liabilities of a comercial bank or thrift institutions. |
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2.Describe the categories that make up the major assets and liabilities of a bank’s balance sheet.
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P
Asset- own Liabilities- owe |
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3.What is vault cash?
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P294
P-G20 Cash held by a bank 2% |
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4.What are required reserves? What is the reserve ratio? What are excess reserves?
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P295
P=G16 required reserve- Specific percentage of the banks own deposit liabilities. reserve ratio-ratio of the required reserves the comercial bank must keep in the banks own outstanding checkable -deposit liabilities. excess reserve-G6-are found by subtracting its required reserves from it's actual reserves. |
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5.What is the primary function of “reserves”?
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P296 under control
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6.When a check is first drawn on one bank and then deposited into a different bank, what is the effect of this transaction on each bank’s reserves?
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P296
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7.What determines how much funds a bank will make available for loans?
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P298
It limits its lending to the amout of its excess reserves. |
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8.What happens when a bank buys government securities from the public? When it sells government securities?
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P299
The effect is essentially the same as lending , ew money is created. |
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9.What is the tradeoff between a bank’s profitability and its liquidity?
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P299
Profit and liquidity |
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10.What is the federal funds rate?
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P-G7
the interest rate banks and other depository institutions charge one another on overnight loans made out of their excess reserves -Rate at which banks loan to other banks. |
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11.What is the money multiplier? How is it computed? How does it affect the economy?
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P302-g12
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12.THE LAST WORD: What caused the bank panics of the Great Depression? What lessons were learned? What changes were made in the banking system to deal with future panics?
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P303
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13.What is meant by the “multiple destruction of money”?
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P304
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