What do member banks of the Fed do with customer deposits?

Member banks of the Federal Reserve System manage customer deposits by keeping a portion as required reserves and lending out the remaining funds. This practice ensures that the banks maintain enough liquidity to meet customers' withdrawal demands, while the loans generated from these deposits contribute to the economy by providing funds for consumers and businesses. The portion kept as reserves is determined by reserve requirements set by the Federal Reserve.

In the broader context of banking, this activity also underscores the role of financial institutions in the money supply process. When banks lend money, they effectively create new deposits through the borrowing process, leading to increased money circulation within the economy.

The other options suggest practices that don't accurately reflect the banking operations related to deposits. Rather than enforcing wage-price controls or using all deposits to calculate interest rates, member banks strategically balance their reserves and loans to support economic activity while ensuring stability in their operations.