Unformatted text preview: rmit creation of new loans.
The process continues until the last deposit (less Required
Reserves.) too small to lend.
What happens when Cash is withdrawn? Reserves depleted,
3. M ultiple contraction in sources of reserves
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
A. A s nation's central bank, responsible for
coordinating policy with other CBs
B. Foreign Bank Supervision Enhancement Act
1. Fed oversight of foreign banks operating in US
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
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
E. What are the goals of Monetary Policy? Fiscal
F. How do changes in Monetary Policy affect
G. How does they Fed increase (decrease) the
Dr. David P. Echevarria All Rights Reserved 10...
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- Fall '09
- Monetary Policy, Federal Reserve System, Dr. David P. Echevarria, P. Echevarria