 |  Macroeconomics, 9/e Campbell R. McConnell,
University of Nebraska, Lincoln
Stanley L. Brue,
Pacific Lutheran University
Thomas P. Barbiero,
Ryerson University
How Banks Create Money
Key TermsBelow are the key terms featured in this chapter. Clicking on a term will reveal its definition. The textbook's full glossary is also available for online searching.
| Actual reserves | The funds that a bank has on deposit at the Bank of Canada (plus its vault cash).
| | | | | Balance sheet | A statement of the assets, liabilities, and net worth of a firm or individual at some given time.
| | | | | Desired reserve ratio | The specified percentage of deposit liabilities a chartered bank chooses to keep as vault cash.
| | | | | Desired reserves | The amount of vault cash each chartered bank chooses to keep on hand for daily transactions. This amount includes reserves held at the Bank of Canada for cheque settlements among the chartered banks.
| | | | | Excess reserves | The amount by which a chartered bank's actual reserves exceed its desired reserves; actual reserves minus desired reserves.
| | | | | Fractional reserve | A reserve ratio that is less than 100 percent of the deposit liabilities of chartered bank.
| | | | | Monetary multiplier | The multiple of its excess reserves by which the banking system can expand demand deposits and thus the money supply by making new loans (or buying securities); and equal to one divided by the desired reserve ratio.
| | | | | Overnight loans rate | The interest rate banks charge one another on overnight loans made out of their excess reserves.
| | | | | Vault cash | The currency a bank has in its vault and cash drawers.
|
|
2002 McGraw-Hill Higher Education