Buy custom The Creation of Money
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Topic: |
Business
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Number of pages / Number of words: |
8 / 2152 |
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Dealers of these securities then receive payment from the Fed which results in a credit or deposit to the dealers checking account. This deposit increases the checking deposit component of the money supply. By purchasing securities and writing a check against itself, the Fed has increased the amount of money in the economy...
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One way a bank can obtain reserves is by borrowing them from the Federal Reserve. "The discount rate is the rate at which the Federal Reserve Bank charges member banks for overnight loans. (2006) The Fed actually controls this rate directly. When the Federal Reserve charges a high interest rate for these borrowings, banks will not borrow as much reserves as when the Federal Reserve charges a low interest rate...
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General points of the essay
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