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Banking6 - deposit and a reserve requirement Money Supply...

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Banking Terms Government Bonds - Bonds issued by the government and bought and sold by the Fed as a form of monetary policy to manipulate the money supply. Inflation - An increase in the price level over time. Interest - Money paid by a borrower to a lender in return for the use of money in the form of a loan. Interest Rate - The rate of interest in the form of percent of the balance due per year. Lender - One who gives money to be repaid at a later date, with interest. Liabilities - Money owed. Loans - Money given by lenders to borrowers. Monetary Policy - 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. Money - The stock of assets used in transactions within an economy. Money Multiplier - The number that describes the change in the money supply given an initial
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Unformatted text preview: deposit and a reserve requirement. Money Supply - 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. Paper Balances - Deposits that exist on paper but are not backed by physical currency. Principle - The initial amount of money given as a loan. Reserve - Money not given out in loans that is available for repaying depositors. Reserve Requirement - 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. Savers - Individuals who deposit money in banks. Treasury - The government agency that prints, mints, and stores money. Formulae Money Multiplier = 1 / (reserve requirement) - Change in Money Supply = [initial deposit * (1 / reserve requirement)] - initial deposit -...
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