Functions of FED:
- issues paper money
- sets reserve requirements and holds reserves of the bank
- lends money to banks and charges them interest
- they're a check clearing service for banks
- acts as a personal bank for the government
- supervises member banks
- control money supply
Multiple Deposit Expansion
Reserve Requirement:
- the % of Demand Deposits that must not be loaned out
- usually 10%, no more
- amount set by the FED
- FED requires banks to always have money available for consumer demand for cash
Three Types of Multiple Deposit Expansion Question
- Calculate initial change in excess reserves (amount a single bank can loan from initial deposit)
- Calculate the change in loans in banking system
- Calculate change in money supply
No comments:
Post a Comment