The Federal Reserve System – Flashcards

A. The Board of Governors B. The Reserve Banks C. The Federal Open Market Committee

To create stability in the economy and to improve to the efficiency of the national payments system.

Congress wrote the act in 1913.

Seven members.

They are appointed by the president and confirmed by the U.S. Senate.

14 years.

To write regulations that make commercial banks financially in check and strengthen the nation's economy.

Monetary policy.

The seven governors from the Board and 5/12 presidents of the Reserve Banks.

The interest rates at which depository institutions ( ex: banks) lend reserve balances to other banks.

Twelve.

1. Providing financial services 2. Contributing to monetary policy 3. Supervising commercial banks

To provide the nation with a safer, more flexible, and stable monetary financial system.

1. Providing financial services 2. Contributing to monetary policy 3. Supervising commercial banks

Twelve.

Twenty- four.

It means to control the money supply within the circulation.

1. Discount rate 2. Reserve requirements 3. Open Markets Operations ** most frequently used; affects the federal funds rate

Regulation is the written rules that define acceptable behavior and conduct for financial institutions. Supervision refers to the enforcement of these rules.

- Fostering safe sound and competitive practices in the nations banking system. - Protecting consumer's financial transactions. - regulating the bank.

Some of the services include collecting checks, electronically transferring funds, and distributing and receiving cash and coin.

The minimum interest rate set by the Federal Reserve for lending to other banks.

Increase: will make it more expensive for banks to borrow and decrease the money supply Decrease: will make it cheaper for commercial banks to borrow money and increase money supply.

Sets the minimum fraction of customers deposits and notes that each commercial bank most hold as reserves.

Increase: reduced the volume of deposits that can be supported by a given level of resources Decrease: leaves depositories with excess reserves which can induce the expansion of bank credit.

The process of which the Federal Open Markets Committee buys and sells securities to set the money supply.

Increase: buy securities Decrease: sell securities

- lower interests rate - lower reserve requirements - buy securities

- raise interest rates - raise reserve requirements - sell securities

When stimulating the economy..... - buying government securities ( FOMO) lovers the federal funds rate - decreasing the reserve requirements gives banks more money to loan out - decreasing the discount rate makes it cheaper to borrow money for banks * when slowing down the economy to make sure everything is sustainable we do the opposite**

Buying bonds>>> to banks>>> loan out money>>> back to consumers

The interest rates!

- sustainable growth - full employment - low to moderate inflation