RSM230H1 Chapter Notes - Chapter 8: Federal Funds Rate, Open Market Operation, Monetary Base
31 Dec 2017
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Document Summary
Conduct of monetary policy: tools, goals, strategy, and tactics. The two liabilities on the balance sheet, currency in circulation and reserves, are often referred to as the monetary liabilities. They are an important part of the money supply story because increases in either or both will lead to an increase in the money supply. The sum of the fed"s monetary liabilities (currency in circulation and reserves) and the u. s. treasury"s monetary liabilities is called the monetary base. Currency in circulation: the amount of currency in the hands of the public. Reserves: all banks have an account at the fed in which they hold deposits. Reserves consist of deposits at the fed plus currency that is physically held by banks (called vault cash because it is stored in bank vaults). Reserves are assets fro the banks but liabilities for the fed.
