AP Macro Unit 4 Vocab #2

Demand Deposits

• Anything that is owed

• Anything tangible or intangible that is owned

• The percent that banks must hold by law

• The amount that the bank can loan out

• Money deposited in a commercial bank in a checking account

Assets

• Anything that is owed

• Anything tangible or intangible that is owned

• The percent that banks must hold by law

• The amount that the bank can loan out

• Money deposited in a commercial bank in a checking account

Required Reserves

• Anything that is owed

• Anything tangible or intangible that is owned

• The percent that banks must hold by law

• The amount that the bank can loan out

• Money deposited in a commercial bank in a checking account

Liability

• Anything that is owed

• Anything tangible or intangible that is owned

• The percent that banks must hold by law

• The amount that the bank can loan out

• Money deposited in a commercial bank in a checking account

Excess Reserves

• Anything that is owed

• Anything tangible or intangible that is owned

• The percent that banks must hold by law

• The amount that the bank can loan out

• Money deposited in a commercial bank in a checking account

Federal Funds Rate

• The percent of deposits that banks must hold in reserve

• The interest rate that the FED charges commercial banks

• When banks hold only a small portion of deposits to cover potential withdrawals and then loans the rest of the money out

• When the FED buys or sells government bonds

• The interest rate that banks charge one another for one-day loans of reserves

Fractional Reserve Banking

• The percent of deposits that banks must hold in reserve

• The interest rate that the FED charges commercial banks

• When banks hold only a small portion of deposits to cover potential withdrawals and then loans the rest of the money out

• When the FED buys or sells government bonds

• The interest rate that banks charge one another for one-day loans of reserves

Reserve Ratio

• The percent of deposits that banks must hold in reserve

• The interest rate that the FED charges commercial banks

• When banks hold only a small portion of deposits to cover potential withdrawals and then loans the rest of the money out

• When the FED buys or sells government bonds

• The interest rate that banks charge one another for one-day loans of reserves

Open Market Operations

• The percent of deposits that banks must hold in reserve

• The interest rate that the FED charges commercial banks

• When banks hold only a small portion of deposits to cover potential withdrawals and then loans the rest of the money out

• When the FED buys or sells government bonds

• The interest rate that banks charge one another for one-day loans of reserves

Discount Rate

• The percent of deposits that banks must hold in reserve

• The interest rate that the FED charges commercial banks

• When banks hold only a small portion of deposits to cover potential withdrawals and then loans the rest of the money out

• When the FED buys or sells government bonds

• The interest rate that banks charge one another for one-day loans of reserves