The Three Most Important Things I’ve learned in this Course
Bank Reserves
Bank Reserves are banks that hold currency and deposits in accounts with their central bank or the Federal Reserve. These reserves are essentially held in bank vaults also called cash vaults. All banks hold required reserves due to the reserve requirements set by the Federal Reserve. Banks hold additional reserves, called excess reserves which banks use to meet its obligations when funds are withdrawn, either by a depositor or when a check is written on an account.
The reserve requirements set by the Fed enforces the banks to maintain a certain percentage of their reserves. Therefore, their reserve total will fluctuate depending on the account balance. For instance, let’s say a bank has received a deposit of $100.00. They are obligated to hold $10.00 as required reserves and the remaining $90.00 would be held as excess reserves. The Fed can increase or lower the required reserve percentage depending upon the situation with the economy.
This percentage of required reserves will dictate how much money banks can create or have available for loans or investments. If the reserve requirement is raised, banks will have less money to loan and if it’s lowered, banks will have more money to loan. Both of these instances will alter the amount of money banks have on hand called, money supply.
The reserved money is used to process check and payments and other unexpected cash flows banks may incur. If for some reason a bank experiences large withdrawals from their depositor’s and their reserve balance is not enough to cover its obligation to pay, the bank will then borrow from the Federal Reserve System. This could be a result of a bank not ha...
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So, essentially, money has three functions which are, medium of exchange where money is exchanged for payment of goods and services, unit of account which measures the value of goods and services and store value which saves the purchasing power from the time money is received to when it is spent.
Bottom line, money is very important and it can be measured more than just a dollar amount that one carry’s around in their wallet or purse.
As a result of this class I not only learned what I previously wrote but also how interest rates are determined, what causes fluctuations, inflation, foreign exchange transactions, supply, demand, value of money, the structure of the financial market and how it operates. There is so much to learn about the financial markets which help us understand why our economy operates that way it does. This was an awesome class.
The reserve ratio is the ratio of the required reserves the commercial bank must keep to the bank’s own outstanding checkable-deposit liabilities (Brue, 2004, p. 254). By raising and lowering the ratio, the Fed can control how much the commercial banks can lend. For example, if the Fed lowers the reserve ratio, commercial banks will now have more excess reserves, allowing them to lend more money to businesses or individuals. Vice-versa, by increasing the ratio, the Fed forces the banks to lend less money due to having smaller excess reserves. If the bank is deficient in the amount of reserves it has, the bank is forced to reduce checkable deposits and, subsequently, reduce the money supply.
The Federal Reserve System is the central banking authority of the United States. It acts as a fiscal agent for the United States government and is custodian of the reserve accounts of commercial banks, makes loans to commercial banks, and is authorized to issue Federal Reserve notes that constitute the entire supply of paper currency of the country. Created by the Federal Reserve Act of 1913, it is comprised of 12 Federal Reserve banks, the Federal Open Market Committee, and the Federal Advisory Council, and since 1976, a Consumer Advisory Council which includes several thousand member banks. The board of Governors of the Federal Reserve System determines the reserve requirements of the member banks within statutory limits, reviews and determines the discount rates established pursuant to the Federal Reserve Act to serve the public interest; it is governed by a board of nine directors, six of whom are elected by the member banks and three of whom are appointed by the Board of Governors of the Federal Reserve System. The Federal Reserve banks are located in Boston, New York, Philadelphia, Chicago, San Francisco, Cleveland, Richmond, Atlanta, Saint Louis, Minneapolis, Kansas City and Dallas.
Money is the main source of power in the world, but in ways it can be viewed as good or bad depending on the situation. It has a negative connotation when mentioned by the word “acts”. “ Acts” means to perform a fictional role. Which shows that most things involving money are fake. Though humans associate being fake with being morally wrong,but its somehow acceptable if there is a greater power involved. Another definition for acts is to take action;do something. In this case to take an action can be either good or bad. There are many ways to come across money, but nobody cares if it is good or bad because it deals with a greater power.
It’s mandatory for all the banks to deposit a certain determined percentage of their assets with the central bank to make sure that the banks’ customer deposits are safe. These percentages are what the central bank adjusts to reduce or increase the banking lending ...
The first major aspect of the monetary policy by the Federal Reserve is its interest rate policy. This interest rate policy is mainly determined by the figure for the federal funds rate, which is the rate at which commercial banks with balances held within the Federal Reserve can borrow from each other overnight in ord...
Another problem prior to the establishment of the Federal Reserve System was the inelasticity of bank credit and the supply of money. Small banks placed their excess reserves in large central reserve banks. Whenever a bank’s depositors wanted their funds, the smaller banks would be covered by the central banks. The system worked well during normal conditions. Some banks would draw down on their reserves as other banks would be building up their reserves. In times of excessive demand, however, the problem became quite serious. When the public wanted large amounts of currency, the
Money has evolved with the times and is a reflection of the progress of man. Early money was itself a physical commodity, grain, gold or silver. During the vital stage, more symbolic forms of money such as certificates of deposit, bank notes, checks, letters of credit, bonds and other forms of negotiable securities came into prominence. Social development transformed money in to a trust, “In God We Trust' it says on the back of the ten-dollar bill.” (The Ascent of Money, 27) Today money is faith in the person paying us and belief in the person issuing the money he uses or the institution that honors his money. This trust has no end it can be extended to a greater number of individuals.
That’s money that account holders entrust in there bank to keep for their future transactions. Deposits are generally referred to as core deposits; these are typically the checking and savings accounts that so many people currently have. Most of the time they are short term deposits. The customer reserves the right to withdraw all his/her money out of their account at any given time at any given moment. They are also insured up to 250,000 dollars. Interest rates are very low to when you’re making deposits. Making a deposit should be an easy process. You just go to your bank and tell them you want to deposit however much money you want to whichever account you
Well in the financial literacy class they would teach you how you should be learning how to budget there money and explain how having a spending plan would ensure that you have enough money to buy things that are important to you. Also when using a budget or a spending plan is a great way to keep you out of debt, or even help you work your way out of debt. In the class there would be courses where you talk about your goals and how you want to look financially to look like. I think this class would help many people in the long run with their fi . When reading an article about keeping up with your personal finances it states “I personally believe that financial stress is one of the hardest things for people to deal with.
While it is true that there are many classes that may be more important for a student to graduate, it would still be beneficial for students to have a financial class offered to them. Many states across America agree, in fact five states require a personal financial class to graduate and seventeen states require students to take an economics class during the course of their high school career (Jones-Cooper 2-3). While most states and schools will agree that it would be hard to add another required course to the already busy schedule, these states see that it is also more beneficial to a student’s future to have a financial class that will help them be more prepared for their future after high
The first four weeks is already completed? This thought actually bums me out a bit, because I was thoroughly enjoying this course! My first week of class had me absolutely enthralled to continue studying about sustainability in industrial practice, but it also has provoked so much thought within me, things I have never even considered before. I know it might sound cheesy to say “this class changed me,” but it truly did affect my everyday life. I thought I was always fairly environmentally conscious, but I have learned that I could do SO much more.
Money supply is the availability of money in the hands of the public (economy) that can be used to purchase goods, services and securities. In macroeconomics, the price of money is equivalent to the rate of interest. There's an inverse relationship between money supply and interest rates. As money supply increases, interest will decrease. On the other hand, interest will increases as money supply decreases. It is very important to understand that the economy works at market equilibrium. There are several factors affecting money supply; and these contributing factors will be the main focus of this paper. Understanding the basic principle on money supply is imperative to have a good grasp on the macroeconomic impact of money supply on business operations.
The invention of money was a major improvement in peoples’ lives. In the past, people usually had to travel all day to find the person who is willing to exchange their goods. In addition, the goods people want to exchange did not have the standard value of measurement. This led to unequal exchanges. Furthermore, it is not convenient to carry heavy goods from one place to another for an exchange. To solve these issues, money will be the only solution. Later, people tend to develop money from cowry shells to credit cards for the convenience and to improve their society.
Personal Finance is a class I’ve wanted to take for a while now. My major is Finance not because I want a career in finance but more to learn about finance for my own personal situation. This class taught me so much! During this class I was able to evaluate my financial situation and set financial goals for myself. The four topics that helped me the most were emergency savings, buying a car, purchasing a home, retirement, and estate planning. After completing this class I have a better understanding of these topics and how to achieve my financial goals.
Business finance has taught me how to manage risk and return as well as making capital investment decisions throughout the semester. Professor Schott has gone through each chapter carefully well making sure that each student grasps each concept before moving on. He has used many tools such as LearnSmart, lectures and homework assignments to make sure that us students have a good idea of the concept before giving us exams.