Create an account
Representative Bank Assets
Cash (in the vault, in the ATM, etc)
Deposits at the federal reserve
other assets (value of building and capital)
Representative Bank Liabilities
DDO- demand deposit and other checkable accounts
time and savings accounts
other liabilities (money borrowed from other banks for capital)
capital accounts- shareholder's money and actual value of the bank
the Fed requires banks to keep a certain percentage of their cash and deposits in the Fed- the percentage amount is based on the banks' liabilities
all of the money that is not sent to the fed- the banks will make loans with this so as to earn interest
coins- the FED buys them with the notes they make
loans to financial institutions (number is big because of banking bailout in 2009)
government securities- the FED buys securities from banks and they can gain interest on them and help fund the federal government
federal reserve notes- issued paper money
Deposits of Financial Institutions-
Deposits of US Treasury-
the ease with which a thing can be converted and accepted with little or no loss of purchasing power
Currency in the hands of the public and DDO
does not include currency held by the FED, US treasury, or commercial banks. also checkable deposits of the government held by banks
M1+Savings Deposits+Small Time Account+Money market Mutual Fund (assortment of stocks through a company)
Usefulness of Money
Acceptability- currency and DDO are accepted as a fair medium of exchange (if PL increases exponentially, businesses may not choose to accept it)
Legal Tender- money is backed by the government
Relative Scarcity- money holds value
Setup of the Fed
led by a board of governors appointed by the president and who have long terms so they are more independent of the politicians in power
12 federal banks that are owned by the banks in its district but controlled by the BOG
Federal Open Market Committee
aids the board of governors in conducting monetary policy
directs the sale and purchase of government securities in the open market
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