Ch. 14, 15 notes - ii. Reserve requirements- minimum amount...

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I. Ch. 14 a. Money- medium of exchange, unit of account, store of value b. Money supply i. Coins ii. Paper money iii. Checking accounts 1. Demand deposit account 2. Negotiable order of withdrawal 3. Share draft account 4. Special types of checks c. Measuring the money supply i. Medium of exchange 1. M1- currency in the hands of the public, demand deposits, other checkable deposits, traveler’s checks a. Highly liquid 2. M2- includes M1 and (small denomination) time deposits, money market deposit accounts, money market mutual funds 3. M3- M1, M2, and large time deposits a. Not very liquid d. Banking system i. Depository institutions 1. Commercial banks 2. Savings and loan associations 3. Mutual savings banks 4. Credit unions ii. Compound interest- interest paid on principle and past interest payments (earning interest in interest as well as principle) e. Types of savings accounts i. Money market deposit accounts ii. Savings accounts iii. Time deposits (CDs) f. Business of Banking i. Balance sheet- shows assets, liabilities, and net worth
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Unformatted text preview: ii. Reserve requirements- minimum amount of vault cash and deposits with the Fed that must be maintained by a bank iii. Money multiplier- amount of money the banking system generates with each dollar of reserves Insert formula II. Ch. 15 a. Federal Reserve System- the central bank of the U.S. i. Structure of the Fed 1. Board of Governors 2. Federal Open Market Committee 3. Reserve Banks ii. Functions of the Federal Reserve System- see page 442 b. Monetary Policy- changing the economys money supply to assist the economy in achieving maximum output and employment and also stable prices. i. Open market operations: the purchase or sale of securities by the Fed ii. Discount rate: the rate that Fed banks charge other banks for loans iii. Reserve requirement: changing how much vault cash and deposits with the Fed that must be maintained by a bank c. Advantages and Disadvantages of Monetary Policy...
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This note was uploaded on 07/13/2008 for the course ECON 201 taught by Professor Baker during the Fall '07 term at University of Tennessee.

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Ch. 14, 15 notes - ii. Reserve requirements- minimum amount...

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