Unformatted text preview: a situation in which banks’ reserves equal 100 per cent of their deposits 7. Reserve-deposit ratio: bank reserves divided by deposits 8. Fractional-reserve banking system: a banking system in which bank reserves are less than deposits so that the reserve-deposit ratio is less than 100 per cent 9. Open-market operations (OMOs): open-market purchase and open-market sales 10. Open-market purchase: the purchase of government bonds from the public by the central bank for the purpose of increasing the supply of bank reserves and the money supply 11. Open-market sale: the sale by the central bank of government bonds to the public for the purpose of reducing bank reserves and the money supply 12. Velocity: a measure of the speed at which money circulates (V = P x Y / M) 13. Quantity equation: money times velocity equals nominal GDP (M x V = P x Y)...
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- Spring '14
- Fractional-reserve banking, bank reserves