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Title: Macroeconomic Impact On Business Operations

Essay Details

Subject: Business
Author: Mary S
Date: April 20, 2011
Level: University
Grade: A
Length: 6 / 1747
No of views: 0
Essay rating: good 0, average 0, bad 0 (total score: 0)

Essay text:

When a loan is made to a customer, funds are transferred to borrowers through checkable deposits. The loan creates an asset on one side of the bank's balance sheet and a liability on the other side (the checkable deposit). As the borrower uses the new loan, the checkable deposit, to make purchases money is created because addition checkable deposits will be created in other banks...

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As the borrower uses the new loan, the checkable deposit, to make purchases money is created because addition checkable deposits will be created in other banks. Real-world complications can arise from this money creation model. The Federal Reserve does not constrain the banks ability to increase its reserve as, "reserves can be borrowed overnight in the Fed funds market at a rate that changes little from day to day" (Federal Reserve Bank of Atlanta, 1993)...

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