Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo

bank run
when depositors race to the bank to withdraw their deposits for fear that otherwise they would be lost
basic quantity equation of money
money supply × velocity = nominal GDP
central bank
institution which conducts a nation’s monetary policy and regulates its banking system
contractionary monetary policy
a monetary policy that reduces the supply of money and loans
moving in the opposite direction of the business cycle of economic downturns and upswings
deposit insurance
an insurance system that makes sure depositors in a bank do not lose their money, even if the bank goes bankrupt
discount rate
the interest rate charged by the central bank on the loans that it gives to other commercial banks
excess reserves
reserves banks hold that exceed the legally mandated limit
expansionary monetary policy
a monetary policy that increases the supply of money and the quantity of loans
federal funds rate
the interest rate at which one bank lends funds to another bank overnight
inflation targeting
a rule that the central bank is required to focus only on keeping inflation low
interest rate on reserve balances (IORB)
the interest the Federal Reserve pays banks on their reserves held at their Federal Reserve bank
lender of last resort
an institution that provides short-term emergency loans in conditions of financial crisis
loose monetary policy
see expansionary monetary policy
open market operations
the central bank selling or buying Treasury bonds to influence the quantity of money and the level of interest rates
quantitative easing (QE)
the purchase of long term government and private mortgage-backed securities by central banks to make credit available in hopes of stimulating aggregate demand
reserve requirement
the percentage amount of its total deposits that a bank is legally obligated to either hold as cash in their vault or deposit with the central bank
tight monetary policy
see contractionary monetary policy
the speed with which money circulates through the economy; calculated as the nominal GDP divided by the money supply
Order a print copy

As an Amazon Associate we earn from qualifying purchases.


This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax's permission.

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at
Citation information

© Jan 23, 2024 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.