Buy custom Federal Reserve's Role in the Economy
Essay's paper info
| Topic: |
Business
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| Number of pages / Number of words: |
10 / 2782 |
Essay's paper body
After the required reserves are tucked away, the balance of deposits in private banks can be used for loans. These loans accumulate interest which becomes profit for the banks. Most people use credits and debits in the form of drafts to do their banking business. This gives banks the ability to create money out of nothing by loaning credit to Bob from Peter and Paul's deposits as long as Peter or Paul can access their money as they desire...
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Most people do not withdraw all their funds in the way of cash which means the bank can move money around as needed. This makes the money multiply as consumers, banks, and depositors use the same funds in the way of credits and debits to make transactions.
When the economy is growing too fast, the Fed needs to reduce the amount of available money...
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General points of the essay
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