Notesale: Turn your study into money

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Extracts from the notes are below, to see the PDF you'll receive please use the links above

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Seminar 4 Statements
Individuals that lend funds to a bank by opening a checking account are called depositors
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The monetary base consists of currency in circulation and reserves
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The percentage of deposits that banks must hold in reserve is the required reserve ratio
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Purchase and sales of government securities by the Federal Reserve are called open market operations
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When a primary dealer sells a government bond to the Federal Reserve, reserves in the banking system
increase and the monetary base increases, everything else held constant
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A decrease in float leads to an equal decrease in the monetary base in the short run
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In the simple deposit expansion model, if the Fed purchases $100 worth of bonds from a bank that
previously had no excess reserves, the bank can now increase its loans by $100
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In the simple deposit expansion models, if the Fed extends a $100 discount loan to a bank that previously
had no excess reserves, the bank can now increase its loans by $100
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10
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67
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The amount of borrow reserves is negatively related to the discount rate and is positively related to the
market interest rate
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Short Essay Type Questions
The First National Bank receives an extra $100 of reserves but decides not to lend out any of these reserves
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Since there are no loans created from the new reserves, no additional deposit creation will occur
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If the First National Bank and all other
banks use the resulting increase in reserves to purchase securities only and not to make loans, what will
happen to checkable deposits?
A - Checkable deposits will remain the same

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