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Unformatted text preview: What happens when you deposit money into a bank? First, the money is recorded (usually by computer) and added to your account. It is then placed into the vault. At various times during the day, money is removed from the vault and taken to a second bank. This bank, unlike the first, does not serve individuals. It is a "banks' bank," usually a branch of the Federal Reserve. The first bank is able to make deposits, withdrawals, and take out loans from the second bank. When you walk into a bank to withdraw money or to take out a loan, the reverse of the process outlined above occurs. If the first bank does not have enough money in the vault to cover the withdrawal or the loan, the first bank goes to the second bank and withdraws money. If the first bank does not have enough money in its account at the second bank, then it must take out a loan at a lower rate of interest than the loan that it...
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- Fall '10