The Supply of Money

Commercial Banks:

The financial intermediaries which historically have been the major source of checking deposits and short-term business loans.

Credit Cards:

Cards involving a line of credit which permits the purchase of items on a delayed payment basis.

Demand Deposits:

Deposits in commercial banks or thrift institutions against which checks can be drawn.

Desired Excess Reserves:

For commercial banks, desired re serves less required reserves.

Discount Rate:

The rate of interest member banks pay when they borrow reserves from the Federal Reserve banks (sometimes called the rediscount rate or the borrowing rate).

Equilibrium Money Supply:

The money supply which exists when actual excess reserves equal desired excess reserves.

Excess Reserves:

For commercial banks, reserves less required reserves.

Means Of Payment:

An asset which can be exchanged directly for goods, services, and other financial assets. A medium of exchange.

Member Bank Reserves:

Reserve deposits at the Federal Reserve banks plus vault cash, for commercial banks which are members of the Federal Reserve System.

M-1 Money Supply:

Cash outside the Treasury, the Federal Reserve banks, and commercial banks plus demand deposits at commercial banks.

The M-I money supply plus savings deposits at commercial banks, NOW accounts at commercial banks and thrift institutions, credit union share draft accounts, and demand deposits at thrift institutions.

Money Supply Multiplier:

The change in the equilibrium money supply divided by the change in bank reserves (or excess reserves) provoking it.

Nonmember Banks:

Commercial banks which are not members of the Federal Reserve System.

NOW Accounts:

Negotiable order of withdrawal accounts. Savings deposits on which checks can be drawn directly. At present, their availability is confined to depository institutions in New England and New York State.

Open-Market Operations:

Purchases or sales of U.S. government securities in the open market by the Federal Reserve authorities.

Regular Savings Deposits at Commercial Banks:

Bank deposits which earn interest but do not have specified maturity dates.

Required Reserves:

Reserve requirements times deposits outstanding.

Reserve Requirements:

Requirements stating the minimum percentage reserves can bear to deposits outstanding.

Thrift Institutions:

Savings and loan associations, mutual savings banks, and credit unions.

Time Deposits With Specific Maturity Dates:

Deposits at commercial banks and thrift institutions on which the maturity date is specified at the time of deposit. Early redemption is penalized by a lower return or, in the case of negotiable certificates of de posit, by transactions costs.