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Required Reserves and the Deposit Multiplier definitions

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Termini in questo insieme (15)

  • Money Supply
    Total value of currency in circulation plus checking account deposits, reflecting the amount of money available in the economy.
  • Checking Account Deposit
    Funds placed in a bank account that can be withdrawn or used for payments, contributing to the money supply.
  • Fractional Reserve Banking
    System where banks keep only a portion of deposits as reserves and loan out the remainder, enabling money creation.
  • Reserve Ratio
    Proportion of deposits banks must hold as reserves, calculated as reserves divided by total deposits.
  • Required Reserves
    Minimum amount of reserves a bank must legally maintain, determined by government regulations.
  • Excess Reserves
    Funds held by a bank above the mandated minimum, available for lending or other uses.
  • Money Multiplier
    Factor showing how an initial deposit can expand the money supply, calculated as one divided by the reserve ratio.
  • Asset
    Resource owned by a bank, such as cash or loans, used to balance liabilities and support operations.
  • Liability
    Obligation a bank owes, typically deposits from customers that must be available for withdrawal.
  • Deposit Multiplier
    Process by which repeated lending and depositing amplifies the initial deposit, increasing the money supply.
  • Currency in Circulation
    Physical money, such as coins and bills, actively used outside banks in the economy.
  • Balance Sheet
    Financial statement showing a bank’s assets and liabilities, used to track reserves and loans.
  • Loan
    Amount lent by a bank from excess reserves, increasing money supply as recipients spend or deposit funds.
  • Reserve Requirement
    Government-imposed rule specifying the minimum fraction of deposits banks must keep as reserves.
  • 100% Reserve Banking
    System where banks hold all deposits as reserves, preventing money supply expansion through lending.