Consolidated Balance Sheet: All Commercial Banks A В Assets: Reserves $40 $ 42 $ 41 $ 40 58 Securities 60 $ 60 60 Loans 102 102 $ 102 $ 102 Liabilities and net worth: 200 $ Checkable deposits 200 $ 200 $ 200 Loans from the Federal Reserve Banks 2 $ 2 $ $ Consolidated Balance Sheet: 12 Federal Reserve Banks A Assets: 285 $ 283 $ Securities $283 283 3 $ Loans to commercial banks 2 2 Liabilities and net worth: Reserves of commercial banks 40 42 2$ 41 40 Treasury deposits 225 $ 225 $ Federal Reserve Notes 225 225 15 $ 15 $ Other liabilities and net worth 15 15 d. Commercial banks increase their reserves after the Fed increases the interest rate it pays on reserves. Which of the columns above could represent this action?
Monetary Policy and Interest Rate
Monetary policy refers to the policy which is enforced by the central bank of the country to control the money supply and economic development of the country. The main aim of monetary policy is to manage inflation, consumption, and growth of the economy. The central bank influences interest rates to manage the money supply. In monetary policy, the central bank may revise the interest rate to increase and decrease the flow of money.
Development of the US Monetary System
The monetary system of a country refers to the system in which a government provides money in the economy of the country. In the modern-day monetary system, usually it contains the National Treasury, the mint where the notes are being printed. The Central bank and the commercial banks regulate the money supply in the economy of a country.
Commercial banks increase their reserves after the Fed increases the interest rate it pays on reserves. Which of the columns above could represent this action?
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