Examples of Certificate of Deposit in the following topics:
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- Cash and cash equivalents are not just the amount of currency that a business has in its cash registers and bank accounts; they also include several different types of financial instruments.
- Cash equivalents include all undeposited negotiable instruments (such as checks), bank drafts, money orders and certain certificates of deposit.
- A certificate of deposit, or CD, is a financial product offered by banks to their customers.
- CDs are similar to savings accounts in that both types of accounts are insured by the FDIC up to a value of $250,000.
- An example of an early Certificate of Deposit.
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- MB is the total of all physical currency plus Federal Reserve Deposits (special deposits that only banks can have at the Fed).
- M1: The total amount of M0 (cash/coin) outside of the private banking system plus the amount of demand deposits, travelers checks and other checkable deposits.
- M2: M1 + most savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000).
- M3: M2 + all other certificates of deposit (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.
- It is M2 – time deposits + money market funds.
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- There is no single "correct" measure of the money supply.
- Narrow measures include only the most liquid assets, the ones most easily used to spend (for example, currency and checkable deposits).
- Broader measures add less liquid types of assets (certificates of deposit, etc.).
- M2 consists of all the liquid components of M1 plus near-monies.
- More specifically, near monies include savings deposits, small time deposits (less than $100,000) that become readily available at maturity, and money market mutual funds.
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- A savings and loan association is a special kind of deposit institution that only participates in a subsection of financial activities.
- A savings and loan association (or S&L), also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans.
- They are often mutually held (often called mutual savings banks), meaning that the depositors and borrowers are members with voting rights, and have the ability to direct the financial and managerial goals of the organization like the members of a credit union or the policyholders of a mutual insurance company.
- S&Ls accepted savings deposits and used the money to make loans to home buyers.
- The savings and loan association became a strong force in the early twentieth century through assisting people with home ownership, through mortgage lending, and further assisting their members with basic saving and investing outlets, typically through passbook savings accounts and term certificates of deposit.
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- Bank deposits are liquid.
- Stocks are ownership of a corporation, while bonds are a loan to a corporation.
- Presence of a secondary market increases liquidity.
- Treasury bills (T-bills), commercial paper, banker's acceptances, negotiable bank certificates of deposit (CDs), repurchase agreements, Federal Funds, and Eurodollars.
- Thus, the MMDA is covered by deposit insurance.
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- The Fed's assets include securities, discount loans, Items in the Process of Collection (CIPC), Gold Certificates, Special Drawing Rights (SDRs), coins, buildings, and foreign currency reserves.
- Treasury deposits, foreign and other deposits, Deferred Availability Cash Items (DACI), Federal Reserve float.
- Go through the T-account transactions for the checking writing process by changing the amount of the check.
- If the banks reduce the amount of discount loans, then the Fed's assets fall, decreasing both the monetary base and money supply.
- Treasury deposits, the float (CIPC - DACI), gold certificates, SDRs, and foreign government deposits.
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- Total Assets = U.S. gov. securities + discount loans + gold certificates + SDRs + CIPC (2)
- Treasury deposits + Foreign and other deposits + DACI (3)
- Monetary base (B) = U.S. gov. securities + discount loans + gold certificates + SDRs + ( CIPC – DACI ) – U.S.
- Of course, the opposite could occur.
- For example, the Fed has no control over the Treasury deposits, the float (CIPC - DACI), gold certificates, SDRs, and foreign government deposits.
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- Gold Certificates are claims to gold held by the U.S.
- Treasury buys gold, it sells the certificates to the Federal Reserve.
- The Fed held $11 billion in gold certificates in 2012.
- Deposits by depository institutions: Banks hold reserves in vault cash and deposits at the Fed.
- Treasury deposits: The U.S.
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- The amount of money created by banks depends on the size of the deposit and the money multiplier.
- To understand the process of money creation, let us create a hypothetical system of banks.
- Assume that all banks are required to hold reserves equal to 10% of their customer deposits.
- The deposit multiplier is the ratio of the maximum possible change in deposits to the change in reserves.
- When banks in the economy have made the maximum legal amount of loans (zero excess reserves), the deposit multiplier is equal to the reciprocal of the required reserve ratio ($m=1/rr$).