The Fed also acts as a bank for banks. What are the three activities the Fed undertakes when it acts as a bank for banks? Hint: What are the activities the Fed does for banks that are similar to the activities a bank does for its customers? (3 points) The three activities of the Fed are, holding deposits for the bank, lending money to the bank, clearing checks between banks. These activities are to some degree very similar to what bank does to customers, because for banks, it lends money to customers in order to earn interest income.
The Role of Cash Reserves in Fractional Reserve Banking 1. Introduction The essay seeks to explain the function that cash reserves play in the fractional reserve banking system. Two types of banks operate in this banking system, monetary savings banks and private commercial banks, both banks are unique in a sense of their ability to create money. This ability is explained that, these banks keep fraction of their outstanding deposits liabilities as cash in reserves against these deposits in the process of providing loans and spending. The focus of the essay will be on commercial banks, as they have added odd ability of money creation with its own debt.
This paper explains the U.S. financial system to CFO of Jagdambay Exports. I will explain the following questions. 1. Explain the components of a financial market and its relevance to Jagdambay Exports. Be explicit and explain to the CFO how financial markets differ from markets for physical assets and why that difference matters to Jagdambay Exports.
3. The Federal Reserve controls the monetary base through open market operations and extensions of loans to financial institutions, and has better control over the monetary base than over reserves. Although float and Treasury deposits with the Fed undergo substantial short-run fluctuations, which complicate control of the monetary base, they do not prevent the Fed from accurately controlling it. 4. A single bank can make loans up to the amount of its excess reserves, thereby creating an equal amount of deposits.
The fiscal policy is primarily an instrument in the hands of the government whereby it estimates its revenues and expenditures in the economy. This is a very important tool as it would define the flow of money from different sources, indicating the level of activity in the economy. It also defines the broad policies of the government indicating the outwards flow of money in to different sectors of the economy to maintain the overall health of the economy and fulfill its social goals. Apart from the fiscal policy every country has monetary policy at its disposal. This is primarily a tool at the disposal of the central bank of a country which uses different tools to manage the macro economic variables of a country to keep the economy stable or to stabilize it in situations of fluctuations.
• The small businesses have right to get loans with an optimum or bearable interest rate. • The government has a right to induce policies to restrict the risky role of banks in order to protect the money of the tax
Week 8 June 1 – Accounting Statements and Cash Flow The topic that I have learnt today is on accounting statements and cash flow. The statement of cash flows contains the operating, investing and financing which are primary in business activity. Inflow is when the money are received and not necessarily earned. Whereas, outflow is when the cash is paid and not necessarily incurred. The information you get from the cash flow statement can help evaluate the company’s ability to meet its obligations.
Germain Depositary Institution Act (first Tax Reform Act) was passed. Under this act savings and loans institutions were allowed to make loans to non-residential properties to raise the capital which were earlier done by the commercial banks. They were giving loans on the appraised value of the property. All this made thrifts to absorb money from all over the country because of high insurance deposits and high interest rates. Everybody was taking over there share.
They are a conduit for social and economic policy. Comparatively, banks have extended in to other areas, which include insurance, loans, investments, real estate and other financial vehicles. Lastly, the final strength is that banks can create money, by using the reserve requirement to their advantage. However, if you have strengths you have weaknesses. One weakness is that, historically banks have lacked innovation.