ch 15 Macroeconomics
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Fraccional reserve banking
A system in which banks keep only a percentage of their deposits on reserve as vault cash and deposits at the Fed.
The minimum balance that the Fed requieres a bank to hold in vault cash or on deposit with the Fed.
Requiered reserve ratio
The percentage of deposits that the Fed requieres a bank to hold in bank cash or on deposits with the Fed.
Potential loan balances held in vault cash or on deposits with the Fed in excess of requiered reserve.
The federal reserve's use of open market operations, changes in the discount rate, and changes in the requiered reserve ratio to change the money supply (M1)
Open market operations
The buying and selling of goverment securities by the Fed.
The interest rate the Fed charges on loans of reserves to banks
A private market in which banks lend reserve for less than 24 hours.
Federal found rate
The interes rate banks charge for overnight loans of reserves to other banks.
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