Suppose ABC Bank has the following balance sheet items: checkable deposit received of $525 million, bank capital of $100 million, mortgage loans made of $500 million, and securities purchased of $50 million. Does ABC Bank still meet its reserve requirement? Why or why not? If not, what options are available to the bank to keep it from failing?
Monetary Policy and Interest Rate
Monetary policy refers to the policy which is enforced by the central bank of the country to control the money supply and economic development of the country. The main aim of monetary policy is to manage inflation, consumption, and growth of the economy. The central bank influences interest rates to manage the money supply. In monetary policy, the central bank may revise the interest rate to increase and decrease the flow of money.
Development of the US Monetary System
The monetary system of a country refers to the system in which a government provides money in the economy of the country. In the modern-day monetary system, usually it contains the National Treasury, the mint where the notes are being printed. The Central bank and the commercial banks regulate the money supply in the economy of a country.
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