ECON-E 202 Chapter Notes - Chapter 15: Aggregate Demand, Quantitative Easing, Term Auction Facility

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9 Apr 2017
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The federal reserve system and open market operations. What is the federal reserve system: provides the us money, banker"s bank and governments bank, manages the issuing, transferring, and redeeming of us treasury bonds, bills and notes, manages the nation"s payment system, regulates the us money supply. Money: widely accepted means of payment, currency - paper bills and coins, total reserves held by banks at the fed, checkable deposits - your checking or debit account, savings deposits, money market mutual funds, and small-time deposits. Money supply: the monetary base (mb): currency and total reserves held at the fed, m1: currency plus checkable deposits, m2: m1 plus savings deposits, money market mutual funds, and small time deposits. Fractional reserve banking, the reserve ratio, and the money multiplier. Fractional reserve banking: banks hold only a fraction of deposits in reserve, lending the rest. Reserve ratio: rr, ratio of reserves to deposits, determined by how liquid banks wish to be.

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