Bank deposit and credit creation, Managerial Economics

Bank Deposit

Bank notes and coins together constitute the currency in circulation.  But they form only a part of the total money supply.  The larger part of the money supply in circulation today consists of bank deposits.  Bank deposits can either be a current account or deposit account.  These are created by commercial banks and the process is called credit creation.

Credit Creation

The ability of banks to create deposit money depends on the fact that bank deposits need to be only fractionally backed by notes and coins.  Because the bank does not need to keep 100 per cent reserves, it can use some of the money deposited to purchase income-yielding investments.

Posted Date: 11/29/2012 4:56:35 AM | Location : United States







Related Discussions:- Bank deposit and credit creation, Assignment Help, Ask Question on Bank deposit and credit creation, Get Answer, Expert's Help, Bank deposit and credit creation Discussions

Write discussion on Bank deposit and credit creation
Your posts are moderated
Related Questions
Transitional unemployment Transitional unemployment is that situation which prevails due to some temporary reasons.  The main reason for this type of unemployment are:

What is Cyert and March's behavior theory? What are the demerits.

A study of 86 savings and loan associations in six northwestern states yielded the following cost function. I''ve been given the following data; C=2.38- .006153Q1 + .000005359Q2 +

what is traditional theory of cost/explain with suitable diagram

b) Discuss the validity in Zimbabwe of the grounds on which the profit maximising model of the firm has been defended.

Monetary policies This is the direction of the economy through the variables of money supply and the price of money.  Expanding the supply of money and lowering the rate of in

Equilibrium National Income in a Frugal Economy Saving and investment are examples of two categories of expenditure called withdrawals and injections.  A WITHDRAWAL is any inc

You're standing at three light switches at the bottom of stairs to the attic. Each one corresponds to one of three lights in the attic, but you cannot see the lights from where you

how manager can apply scarcity and oppotunity cost in managerial decision making

Average Total Costs (ATC) This is total cost per unit of output, obtained by dividing total cost by total output i.e. ATC   =   Total Cost              Total Outp