ch. 15 Federal Reserve System – Flashcards

subject to laws of supply and demand

want economy to speed up

want economy to slow down

interest rate charged by the Fed to other banks

interest rate charged by banks to its best business customers

method by which a check that has been deposited in one depository institution is transferred to the depository institution on which it was written

meets 8 times a year, decides how the Fed should control the money supply, made up of Board of Governors and Pres. or V.P. of 5 Fed. Reserve Banks

directs operations of Federal Reserve System, supervises the 12 district Federal Reserve Banks, has 7 full-time members appointed by the Pres. approved by the Senate

reduce reserve requirements, reduce discount rates for borrowing reserves, buy government securities on the open market

increase reserve requirements, raise discount rate for borrowing reserves, sell government securities in the open market

commercial banks that are members of, and hold stock in the Fed.

corporations that own one or more banks

paper component of the money supply

metallic forms of money

expansion or contraction of the money supply in order to influence the cost and the availability of credit

requires banks and other depository institutions to keep a fraction of their deposits in the form of legal reserves

consist of coins and currency that depository institutions hold in their vaults, plus deposits with Federal Reserve district banks

rule stating that a percentage of every deposit be set aside as legal reserves

legal reserves in excess of the reserve requirement

debts and obligations to others

properties, possessions, and claims on others

condensed statement showing all assets and liabilities at a given time

excess of assets over liabilities, which is a measure of the value of a business

interest-bearing deposits that cannot be withdrawn by check

deposit a member bank keeps at the Fed to satisfy reserve requirements

Fed allows the money supply to grow and interest rates to fall, which normally stimulates the economy

Fed restricts the growth of the money supply, which drives interest rates up

buying and selling of government securities in financial markets

minimum deposits left with a stockbroker to be used as down payments to buy other securities

create enough extra money to offset the expansion of the money supply, making inflation worse

the market rate of interest minus the rate of inflation

credit rules pertaining to loans for specific commodities or purposes

provision extending truth-in-lending disclosures to consumers

relaxation or removal of government regulations on business activities

total value of goods and services that all firms would produce in a specific period of time at various price levels

economic policies designed to increase aggregate supply or shift the aggregate supply curve to the right

government spending and taxation policies suggested by John Maynard Keynes to stimulate the economy

combination of stagnant economic growth and inflation

potential for being readily convertible into cash or other financial assets

person or institution to whom money is owed

money supply components conforming to money’s role as medium of exchange; such as coins and currency

money supply components conforming to money’s role as a store of value; M1, savings deposits, time deposits

school of thought stressing the importance of stable monetary growth to control inflation and stimulate long-term economic growth

three member group that devises strategies and advises the president of the united states on economic matters

unofficial statistic that is the sum of monthly inflation and the unemployment rate