Would the maximum loan that a bank can make be different when receiving a discount loan...
Would the maximum loan that a bank can make be different when receiving a discount loan from the Federal Reserve of $1 million versus receiving a checking account deposit of $1 million? Explain why or why not.
Homework Answers
The discount window can be used to take loans from the federal reserve which can directly be advanced as loans from the commercial banks. however when there is the checkable deposit of 1 million dollar a certain proportion should be kept in order to honour the reserve requirement. This implies that entire 1 million dollar cannot be used as loan to borrowers.
Therefore the maximum loan that a bank can make will be different and will be lower in case of a checkable deposit than a loan from the federal reserve through the discount window.
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Would the maximum loan that a bank can make be different when
receiving a discount loan...
Suppose the Federal Reserve purchases $10,000 of Treasury bonds from you and that you deposit the...
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