Chapter 15
money multiplier
1 / required ratio
Banks excess reserves =
= actual reserves - required
Assets =
=liabilities + net worth
Balance Sheet
A statement of the assets, liabilities, and net worth of a firm or individual at some given time.
Fractional Reserve Banking System
A system in which commercial banks and thrift institutions hold less than 100 percent of their checkable-deposit liabilities as reserves of currency held in bank vaults or as deposits at the central bank
Banks operating on the basis of ________are vulnerable to "panic" or "runs"
FRACTIONAL RESERVES
Deposit _________ stops banks runs by guaranteeing depoisters that they will always get their money
INSURANCE
What refers to the amount of reserves that a commercial bank must keep that is a % of the banks checkable deposit liabilities
Reserve Ratio
What is ignored when determining required reserves
TIME DEPOSITS AND NON PERSONAL SAVINGS
What magnifies excess reserves into the larger creation of checkable deposit money
The MONEY MULTIPLIER
The two basic functions of commercial banks are to?
accept DEPOSITS and make LOANS
excess reserve ratio
actual - required
Net worth calculated is
assets minus liabilities
what deposit money is destroyed when loans are paid off
checkable
On a balance sheet, the value of assets must be _________the amount of claims on those assets
equal to
Commercial banking system is capable of increasing money by an amount _________________ its excess reserves
greater than
A smaller reserve ratio means a ________ monetary multiplier and a ______ creation of checkable deposit money through loans
higher, greater
Commercial banks can create money through
lending
Non-owners claims against the assets of a bank are called
liabilities
Two methods by which commercial banks to can make money are?
making loans to the public and purchasing government bonds from the public
reserve ratio
required / checkable deposits
