Economics Module 4 Dba Test Questions – Flashcards
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aggregate
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total of all economic activity in the country
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board of governors
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-consists of seven members, each with a 14-year term. -is appointed by the President of the United States and confirmed by the Senate. -analyzes economic data such as interest rates and unemployment rates. -supervises Federal Reserve Banks. -creates and oversees financial regulations. -participates in the Federal Open Market Committee. -communicates with leaders in other parts of the government.
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business cycle
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repeating expansion and contraction of the economy
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contraction
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phase of business with decreasing economic activity
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contractionary monetary policy
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-Decreased money supply -Slowed economic growth -Decreases inflation
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deficit
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measurement of expenses that exceed income
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discount rate
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interest rate the Federal Reserve charges banks to borrow currency.
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expansion
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phase of business cycle with increasing economic activity
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expansionary monetary policy
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-Increased money supply -Faster economic growth -Fights recession
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the federal budget
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plan or record of income and expenses each year
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federal debt
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the amount of money the government owes
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federal reserve banks
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-consist of 12 Federal Reserve Banks, each serving its own region or district of the United States. -include 24 Branch Banks under the 12 Federal Reserve Banks that assist the Reserve Banks in meeting their goals. -provide service to commercial banks and the U.S. Treasury—a Federal Reserve bank is called a "bankers' bank" as it helps banks manage their funds -supervise commercial bank operations within their region. -handle check collection, electronic funds transfer, distribution of currency and coin to banks. -provide services for U.S. Treasury accounts—issue and redemption of U.S. government bonds and securities.
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federal open market committee
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-consists of Board of Governors, President of the New York Reserve Bank, and four other Reserve Bank Presidents on a rotating basis. -gathers for eight meetings per year in Washington, D.C. -uses data, like the unemployment rate, to determine the state of the economy and decide what measures should be taken to adjust the money supply.
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fiscal policy
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government use of taxing and spending to meet economic goals
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member banks
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-consist of 38% of commercial banks in the United States (like Bank of America®). -hold stock in regional Federal Reserve Bank and can receive dividends (payout to stockholders of a portion of company profits, based on number of shares owned) or a portion of the Fed's earnings (from providing banking services to district banks). -receive services from regional Federal Reserve Bank such as check processing, electronic funds transfer, and distribution of currency and coin.
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money supply
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the total amount of money available in the national economy
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Monetary policy
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FEDs actions that monitor and control the U.S. money supply to meet economic goals
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natural monopolies
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product produced most efficiently when there is one supplier
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Open Market Operations
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the Federal Reserve's frequent buying and selling of government securities, considered the most significant of the three tools.
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other depository institutions
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-are technically not part of the Federal Reserve System, yet subject to regulations. -include credit unions, savings and loan associations, commercial banks, and savings banks. -receive services from regional Federal Reserve Bank such as check processing, electronic funds transfer, and distribution of currency and coin.
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peak
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turning point from growth to decline, where production reaches the highest current level
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price stability
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little fluctuation in the price level for goods and services
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regulatory laws
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law businesses must follow
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regulation
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government laws that control businesses
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reserve requirement
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the percentage of a bank's deposits that must be kept as currency and coin in the bank.
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shortage
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price is too low
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surplus
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price is too high
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stagflation
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a period of high unemployment and inflation
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trough
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low-point transition of economy from a period of decline to a growth phase
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unemployment
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people over the age of 16 trying and unable to find work
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Board of Governors
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Which organization provides leadership for the Federal Reserve System?
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Economic data for the year are released and require analysis.
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In which of the following scenarios would the Board of Governors be most likely to intervene?
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Federal Open Market Committee
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Which organization sets monetary policy for the United States?
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To promote economic growth, the Fed lifts home-loan restrictions on people with student-loan debt.
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Which event involves a function of the Federal Reserve System?
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Several member banks run low on currency and coin.
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In which of the following scenarios are the Federal Reserve Banks most likely to intervene?
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Buy government securities
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Which of the following actions would the Federal Reserve most likely take to reduce unemployment?
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Reserve requirements
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Through which tool does the Federal Reserve affect money available for banks to loan?
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discount rate
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Which tool does the Federal Reserve use to control monetary policy through bank borrowing?
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Lower discount rate
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which of the following actions would the Federal Reserve most likely take during an economic recession?
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Increase reserve requirement
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Which of the following actions would the Federal Reserve most likely take to rein in spiraling inflation?
