100% Reserve Banking System
A system in which banks must keep all deposits on hand and ready for withdrawal.
Cash, stocks, bonds, and physical goods that are stores of wealth and value.
An accounting tool where assets and liabilities are compared side by side.
Individuals who take out loans from banks.
Money, either fiat or commodity, that is commonly used in an economy.
Deposits made by in banks that can be withdrawn at any time--that is, on demand.
Money given to banks for safekeeping and to earn interest.
Federal Deposit Insurance Corporation
A corporation that insures individual bank accounts up to $100,000 to ensure that the public is confident
in the banking system.
Federal Funds Interest Rate
The discount interest rate at which the branch banks of the Fed loan money to other banks.
The federal group that controls the money supply though monetary policy and fiscal policy.
Federal Reserve Banks
Branches of the Fed that serve as banks for non-government controlled banks by accepting deposits, giving
withdrawals, and making loans as needed.
Money that has no intrinsic value but that is instead only valuable because it is backed and regulated by
a governing body.
An entity, like a bank, that works between savers and borrowers by accepting deposits and making
Operations by the Fed that affect the money supply including manipulation of the
federal funds interest rate and the reserve requirement.
Fractional Reserve Banking System
A banking system wherein less than 100% of the deposits are required to
be held as reserves.
Bonds issued by the government and bought and sold by the Fed as a form of
monetary policy to manipulate the money supply.
An increase in the price level over time.
Money paid by a borrower to a lender in return for the use of money in the form of a loan.
The rate of interest in the form of percent of the balance due per year.
One who gives money to be repaid at a later date, with interest.
Money given by lenders to borrowers.
Policy used to affect the money supply employed by the Fed. In particular,
this describes the open market operations of buying and selling government bonds.
The stock of assets used in transactions within an economy.
The number that describes the change in the money supply
given an initial deposit and a reserve requirement.
The total amount of currency in circulation as controlled by Fed policy.
Open Market Operations
The purchase and sale of government bonds by the Fed
in order to affect the money supply.
Deposits that exist on paper but are not backed by physical currency.
The initial amount of money given as a loan.
Money not given out in loans that is available for repaying depositors.
The percent of total deposits required to be held back for repaying depositors. This is controlled
by the Fed as a form of monetary policy.
Individuals who deposit money in banks.
The government agency that prints, mints, and stores money.
Money Multiplier = 1 / (reserve requirement)
Change in Money Supply = [initial deposit * (1 / reserve requirement)]
- initial deposit