Banks use checking-account money to sell money {loan}| to people and businesses. Checking-account holders have right to withdraw money.
reserves
In case checking-account holders withdraw money, banks must keep a reasonable or regulated percentage of checking-account money on hand. Banks do not need all checking-account money, because only a percentage of customers need only a percentage of money. Banks like to loan all the money they can {loaned up}. Getting more customers adds to reserves. Loan repayments add to bank reserves, allowing more loans.
reserves: percentage
If reserve percentage is 25%, bank can loan four times amount it has in reserve (1 / 0.25 = 4).
reserves: government
Government can reduce demand by increasing reserve ratio.
Social Sciences>Economics>Microeconomics>Banking
6-Economics-Microeconomics-Banking
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Date Modified: 2022.0224