10 March 2016 (Unit 4)

Function of the FED

1. Issue paper currency 
2. Set reverse requirement
3. Lend money bank & charge them interest 
4. Check clearing service for bank
5. Act as personal bank to government 
6. supervise member banks 
7. Control money supply in the economy

• The Required reserve ratio in the % of demand deposit ( Checking account balances) that must not be loaned out.
• Required Reserve Ratio = 10% (when is set by the government).

Multiple Deposit

• Type 1 : Calculate the intial change in excess reserve.
• Type 2 : calculate the change in loans in the banking system.
• Type 3 : Calculate the change in the money supply