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6 Cards in this Set
- Front
- Back
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Money creation |
Money creation (also known as creditcreation) is the process by which the moneysupply of a country or a monetary region (such as the Eurozone) is increased. |
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Required reserve ratio |
The reserve ratio is the portion of depositors' balances that banks must have on hand as cash. This is a requirement determined by the country's central bank, which in the United States is the Federal Reserve. The reserve ratio affects the money supply in a country at any given time any given time |
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Money multiplier formula |
The money multiplier tells you the maximum amount the money supply could increase based on an increase in reserves within the banking system. The formula for the money multiplier is simply 1/r, where r = the reserve ratio. |
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Excess reserves |
Excess reserves are capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors or internal controls. For commercial banks,excess reserves are measured against standard reserve requirement amounts set by central banking authorities. |
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Prime rate |
The prime rate is the interest rate that commercial banks charge their most credit-worthy customers. |
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Open market operations |
Open market operations (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system, facilitated by the Federal Reserve |
