Macroeconomics
Terms
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- Required Reserve
- Hold as banking deposits
- To hedge
- To shift risk Producers & users of commodities hedge
- Put Option
- Right to SELL shares of stock(Opposite of Call)(stock falls if loss occur)
- Covered Call
- Sells own stock
- Uncovered CAll
- Do not sell own stock
- Straddle
- 1 call + 1 put
- Spreads
- 2 different calls or put
- Fractional Reserve Banking
- Banks must hold primary reserve equal to fraction of their deposit
- Primary Reserve
- Assets which increase when a bank deposits increase
- Fed run by how many?
- Run by 7 person board
- Excess Reserves
- Reserves usually lent or invested to produce interest income
- Secondary Reserve
- Bonds has purchases with its excess reserve
- How many Fed reserve district and what district is Detroit?
- 12 Fed reserve, Chicago District
- To Max increase banks must:
- 1. Lend all their excess Res. 2. No leakage can occur
- Leakage
- Occures when a check drawn on a newly created deposit is not fully deposited in another bank.