Banking Flashcards
0
Q
Depository institutions provide:
A
- Create liquidity
- Minimize cost of obtaining funds
- Minimize cost of monitoring borrowing
- Pool risk
1
Q
Financial institutions
A
- Commercial banks
- Savings and loan associations
- Savings banks and credit unions
- Money market mutual funds
2
Q
Thrift institutions
A
- Savings and loan associations
- Savings banks
- Credit unions
3
Q
Deposit insurance
A
Most financial institutions insured by federal deposit insurance corporation (fidc)
4
Q
Balance sheets
A
Banks use to list their assets, liabilities, and net worth
5
Q
Assets
A
What banks own
6
Q
Liabilities
A
What bank owes
7
Q
Net worth
A
Difference between assets and liabilities
8
Q
Liabilities + networth=
A
Assets
9
Q
Required reserves=
A
Required reserve ration X total deposits
10
Q
Excess reserves=
A
Total reserves- required reserves
11
Q
Demand deposits
A
Claims depositors have against banks assets and checking accounts
12
Q
Prime rate
A
Interest rate banks charge most creditworthy customers for short term loans of less than a year
13
Q
Constraints of deposit creation
A
- Deposits- willingness of customers to continue accepting checks rather than money
- Willingness of consumers to borrow
- Willingness of banks to lend
- Federal regulations
14
Q
Money creation process
A
- Banks have excess reserves
- Banks lend excess reserves
- Quantity of money increases
- New money is used to make payments
- Some of new money remains on deposit
- Some of new money is a currency drain
- Desired reserves increase b/c deposits increase
- Excess reserves decrease but remain positive
