0
If the government loans a bank $1million the bank will report $1 million dollars on the books. Once the bank opens for business and accept deposits from locals the bank increase the amount of money they report. Also the federal reserve has a system called the debit reserve ratio. This ratio allows the bank to lend a large percentage of the local account holders. Often times banks are allowed to only hold 3-6% of it's deposites (local bank account holders).
So if a bank has $1million dollars it only has to have $60,000 inside of the bank, the rest of the money can be invested and lended to credit costumers. On the balance sheet at the end of the year assets will read:
$1million from the federal reserve
$940,000 worth of investments(credit cards, home loans, car loans business loans)
$60,000 Cash
Plus The amount of accrued(real time collective information) deposits, given to the bank by people in the community that allow the bank to hold their money. The total for the bank that started with $1million can grow to over $2million within a quarter(3 months) If the government loans a bank $1million the bank will report $1 million dollars on the books. Once the bank opens for business and accept deposits from locals the bank increase the amount of money they report. Also the federal reserve has a system called the debit reserve ratio. This ratio allows the bank to lend a large percentage of the local account holders. Often times banks are allowed to only hold 3-6% of it's deposites (local bank account holders).
So if a bank has $1million dollars it only has to have $60,000 inside of the bank, the rest of the money can be invested and lended to credit costumers. On the balance sheet at the end of the year assets will read:
$1million from the federal reserve
$940,000 worth of investments(credit cards, home loans, car loans business loans)
$60,000 Cash
Plus The amount of accrued(real time collective information) deposits, given to the bank by people in the community that allow the bank to hold their money. The total for the bank that started with $1million can grow to over $2million within a quarter(3 months)
Wiki User
∙ 16y ago
Add your answer:
Earn +20 pts
The Federal Reserve wants to increase the money supply in the US. What is the Federal Reserve likely to do to accomplish this?
buy securities on the open market.
What happens to the WACC when the federal reserve tightens credit?
WACC will increase.
Why did the federal reserve increase the money supply during y2k scare?
they wanted to create a bubble.
Which of these is an example of how the Federal Reserve would slow the economy to hold off inflation?
One way the Federal Reserve would slow the economy to hold off inflation would be to increase the amount of money banks must have on reserve.
What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1 percent to 1.25 percent?
the discount rate
The Federal Reserve wants to increase the money supply in the US. What is the Federal Reserve likely to do to accomplish this?
buy securities on the open market.
What happens to the WACC when the federal reserve tightens credit?
WACC will increase.
What would most likely happen if the federal reserve decided to increase the reserve requirements in banks?
If the Federal Reserve decided to increase the reserve requirement in banks, it is likely that banks would be targeted more often for robbery. This would be because there would be more money in every federally-insured bank.
Which of the following will increase commercial bank reserves?
deposits and selling of bonds back to the federal reserve.
What is the most likely effect of the Federal Reserve lowering the discount rate on overnight loans?
The most likely effect of the Federal Reserve lowering the discount rate on overnight loans would be an increase in the money supply. an increase in the money supply
Why did the federal reserve increase the money supply during y2k scare?
they wanted to create a bubble.
Which of these is an example of how the Federal Reserve would slow the economy to hold off inflation?
One way the Federal Reserve would slow the economy to hold off inflation would be to increase the amount of money banks must have on reserve.
What tool of monetary policy will the Federal Reserve use to increase the federal funds rate from 1 percent to 1.25 percent?
the discount rate
What government agency conducts monetary policy in the United States?
The Federal Reserve is responsible for managing the money supply in the U.S.
What was the singular achievement of the Federal Reserve Act?
Establishing the Federal Reserve was the singular achievement of the Federal Reserve Act.
When the federal reserve puts money in a banking system?
When there are liquidity problems and/or when they want to increase money supply.
When was the federal reserve established?
The Federal Reserve was created in 1913
