UNIT 4: CH. 14 [3/4]

functions of FED:

1. issue paper currency 
2. set reserves requirements and holds reserves of banks
3. lends money to banks and charges them interest
4. they are a check clearing service for banks
5. act as personal bank for gov.
6. supervises member banks
7. controls money supply in econ.

types of multiple deposit expansion:

1. calc initial change in excess reserves: amount single bank can loan form initial deposit.
2. calc change in loans in banking system. 
3. calc change in money supply.
4. calc change in demand deposit

how banks work:

assets:
reserves: required reserves - % required by FED to keep on hand to meed demand.
excess reserves - % reserves over and above the amount needed to satisfy minimum reserve ratio by FED
loans to firms, consumers, & other banks (earn interest)
loans to gov.
bank property

liabilities:
demand deposits
timed deposits
loans from: FED. reserves & other banks
shareholders equity

creating a bank:
transaction
depositing reserves in a FED. reserve banks
required reserves
reserve ratio