4.4: Banking and the Expansion of the Money Supply Flashcards
1
Q
Fractional Reserve Banking
A
The bank holds a portion of deposits to cover potential cover potential withdrawls and then loans the rest of the money out
2
Q
Money Multiplier Equation
A
1/ Reserve requirement or ratio
3
Q
Demand Deposits
A
Money deposited in a commercial bank in a checking account
4
Q
Required Reserves
A
The percent the bank must hold by law
5
Q
Excessive Reserves
A
The amount the bank can loan out
6
Q
Balance Sheet
A
A record of bank assets, liabilities, net worth
