bank reserves putting, account, increase, directly, currency

RealEstate_CFA

If currency holdings are reduced and checking account holdings increased by same amount it has no affect directly on money supply. But how does it increase banks' excess reserves?

Not sure how putting money into a checking account increases the excess reserves.

draz

I believe:
Decreasing currency holdings (households) by way of deposits, increases Bank money supply. The reserve ratio is static (as determined by the Feds). More money, with the same reserve requirement = excess reserve.

Benjiko

To add the reserve ratio id determined by the Feb so say if I have to hold $100 with the fed and I have 150 as a bank . I can loan $50 . If a customer deposits say $20 . then I can loan Net $70 . My reserves in excess of the $ 100 increase. If I do not have customers depositing . There is no money to lend

disiz64

Caramel. Nice way to put it with the $'s.

kmf229

makes bit more sense now thanks guys