Fill in the Blanks Module 25Online version Banking and Money Creation - Fill-in-the-Blank (Part 1) by Zachary Foust 1 Bank deposits are a major component of the . Banks can depositors' money to investors because it isn't necessary for a bank to keep all of its deposits on hand . Banks can't lend out all the funds placed in their hands by depositors because they have to satisfy any depositor who wants to his or her funds . Currency in and bank deposits held at the Federal Reserve are called bank reserves . Because bank reserves are not held by the public , they are not part of . A T - account shows the assets and of a business . Loans are from the perspective of a bank because they represent funds that those who have borrowed from the bank are expected to repay . Deposits are because they represent funds that must ultimately be repaid to depositors . The of bank deposits that a bank holds as reserves is its reserve ratio . The required reserve ratio is the smallest fraction of bank deposits that a bank hold . A occurs when a bank is unable to pay off its depositors in full . A is a phenomenon in which many of a bank's depositors try to withdraw their funds due to fears of a bank failure . In response to the wave of bank runs that swept across the United States in the early 1930s , the United States established a system of bank regulations that protects and prevents most bank runs . guarantees that a bank's depositors will be paid even if the bank can't come up with the funds . Since depostiors know their funds are even if a bank fails , they have no incentive to rush to pull them out because of a rumor that the bank is in trouble . The Federal Reserve stands ready to money to banks through a channel known as the discount window . A bank can turn to the Federal Reserve and the funds it needs to pay off depositors .
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