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Topic: American History
Number of pages / Number of words: 6 / 1631
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It is very important to understand that whenever the "DR charged by Fed is lower than the FFR charge by other banks; banks tend to borrow from the Fed. If DR decreased, banks tend to borrow from other banks to the Fed. This will result to an increase in the total amount of money supply. Further, it is very essential to understand the spread between the DR and FFR...

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Further, it is very essential to understand the spread between the DR and FFR. A positive spread (DR > FFR) prompts banks to borrow from another banks. This will not result into any changes in the money supply.

As defined in the simulation, "Required Reserve Ratio is the percentage of deposits that any bank holds as reserves"...

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