EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
4th Edition
ISBN: 9780100668201
Author: Mishkin
Publisher: YUZU
Question
Book Icon
Chapter 18, Problem 1DAP
To determine

The percentage change in non-borrowed reserves and federal funds rate.

Concept:

Non-Borrowed reserves - Under the fractional reserve banking system, the depository institutions have to keep a fraction of their deposits as reserves with the Fed. The remaining deposits are extended as loans. To satisfy these reserve requirements, banks can borrow from the central bank at an interest rate known as the discount rate. Reserves that are not borrowed in this way are non-borrowed reserves. Non-borrowed reserves are equal to total reserves minus borrowed reserves.

Federal Fund rate - It is the interest rate charged for overnight loans of reserves from one bank to the other. As the federal funds rate increases, the opportunity cost of holding excess reserves rises and the quantity of reserves demanded falls.

Blurred answer
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:9780190931919
Author:NEWNAN
Publisher:Oxford University Press
Text book image
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Text book image
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Text book image
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Text book image
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education