Ch 15

Question 1

Fractional Reserve Banking System

Answer 1

In which only a portion (fraction) of checkable deposits are backed up by reserves of currency in bank vaults or deposits at the central bank

Question 2

Balance Sheet

Answer 2

Of a commercial bank, is a statement of assets - things owed to the bank or owed to the bank

Question 3

Required Reserves

Answer 3

an amount of funds equal to a specified percentage of the bank’s own deposit liabilities

Question 4

Vault Cash

Answer 4

Till Money, cash held by the bank

Question 5

Actual Reserve

Answer 5

Excess reserves = actual Reserves - required reserves

Question 6

Excess Reserves

Answer 6

Excess reserves = actual Reserves - required reserves

Question 7

Reserve Ratios

Answer 7

The ration of the required reserves the commercial bank must keep to the bank’s own outstanding checkable-deposit liabilities

Question 8

Federal Funds Rate

Answer 8

The interest rate paid on overnight loans that banks borrow immediately from the federal reserves

Question 9

Monetary Multiplier

Answer 9

defines the relationship between any new excess reserves in the banking system and the magnified creation of a checkable-deposit money by banks as a group

Monetary Multiplier = 1/Required Reserve Ratio

Question 10

Maximum Checkable Deposit Creation

Answer 10

MC-D C= Excess Reserves * Monetary Multiplier