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New deposits permit creation of new loans the process

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Unformatted text preview: rmit creation of new loans. The process continues until the last deposit (less Required The Reserves.) too small to lend. Reserves.) What happens when Cash is withdrawn? Reserves depleted, What leading to... leading 1. 2. 3. M ultiple contraction in sources of reserves Multiple contraction Banks resort to borrowing in the federal funds market or Borrowing from the Federal Reserve (discount window) Dr. David P. Echevarria All Rights Reserved 8 GLOBAL RESPONSIBILITIES OF GLOBAL THE "FED" THE A. A s nation's central bank, responsible for A. As coordinating policy with other CBs coordinating B. Foreign Bank Supervision Enhancement Act Foreign (1991); 1. Fed oversight of foreign banks operating in US 1. 2. Approve entry of foreign banks to operate in US C. Basel Accords (See Chapter 18) 1. Capital Adequacy and Risk Managem ent Dr. David P. Echevarria All Rights Reserved 9 HOMEWORK QUESTIONS A. What are the principal objectives of the Federal What Reserve System? Reserve B. How is the Federal Reserve organized? C. What is the function of the board of Governors? D. What is the function of the Federal Open Market What Committee (FOMC)? Committee E. What are the goals of Monetary Policy? Fiscal What Policy? Policy? F. How do changes in Monetary Policy affect How business? business? G. How does they Fed increase (decrease) the How monetary base? Dr. David P. Echevarria All Rights Reserved 10...
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