Chapter 32 Flashcards
(14 cards)
FRACTIONAL RESERVE BANKING SYSTEM
bank lending and creation of money
Single commercial bank transaction
- vault cash
- acquiring property and equipment
- accepting deposits, making loans
- Depositing reserves in a Federal Reserve bank
REQUIRED RESERVED
funds that banks and thrifts must deposit with the federal reserve bank to meet the legal reserve requirement
RESERVE RATIO
fraction of checkable deposits that a bank must hold as reserves in a fed reserve bank or in its own bank vault
EXCESS RESERVES
amount by which a banks or thrift’s actual reserves exceed its required reserves
ACTUAL RESERVES
funds that a bank has on deposit at the federal reserve bank of its district
FEDERAL FUNDS RATE
maximum creation of money by entire banking system
MONETARY MULTIPLIER
the multiple of its excess reserves by which the banking system can expand checkable deposits and thus the money supply by making new loans equal to 1 divided by the reserve requirement
clearing a check
increase banks person who deposited the checks reserve in the fed reserve bank and decrease in the actual bank that it was
granting loans- money creation
good reputation allows bank to give you larger loans
interest on the loan allows bank to make money
buying government securities
new money is created
Creating a bank
need state or national charter
sell X amt of stock to buyers in order to start bank up
Acquiring Property and Equipment
board of directors have to get prop and equip in order to keep bank going
Accepting Deposits
allows bank to keep the money flowing and able to make loans
