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11 Cards in this Set
- Front
- Back
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When Fed buys securities, what happens to money supply and why?
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· Potential of Money Supply increases
· Buying Securities are similar to Getting Loans from Com Banks/Public - Commerical Banks' Reserves Increase (MONEY CREATION) |
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Who does Fed buy securites from?
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Public and/or Commercial Banks
· Either way, Reserves of Commercial Banks Increase |
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What are Open-Market Operations?
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The buying of government bonds from, or the selling of government bonds to, commercial banks and the general public.
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When the Fed sells securities, what happens and why?
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· Potential of Money Supply Decreases
· Similar to Paying Back a Loan - Commercial Banks' Reserves Decrease (MONEY DESTRUCTION) |
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Securities are?
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Public Debt - Money Borrowed by Government from the public
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3 tools of monetary policy
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1) Open-Market operations
2) Reserve Ratio 3) Discount Rate |
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Largest Single Asset in Fed's consolidated balance sheet
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Securities
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Largest Single Liability in Fed's consolidated balance sheet
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Federal Reserve Notes - Paper money issued by the Fed Banks
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If securites bought directly from Commercial Banks, (Com Banks Balance Sheet)
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Commercials Banks Asset: (- Securities, + Reserves) NO LIABILITIES
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If securites bought directly from Commercial Banks, (Fed Banks Balance Sheet)
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Fed Asset: (+ Securities)
Fed LB: (+ Reserves of Commercial Banks) |
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Bigger potential to Increase Bank Lending IF:
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Securites purchased DIRECTLY from Commercial Banks
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