Macro-Econ The federal Reserve

The Federal Reserve is Independent within Government but not independent of Government.

An act of Congress in 1913 created the Federal Reserve System, and President Wilson signed the act into law. That law specifies that the U.S. president nominates Federal Reserve Governors, whom the Senate either confirms or rejects. The president appoints the Federal Reserve chairperson from among the Fed's board of Governors, and the chairperson is required to testify before congress. Most importantly congress could decide to terminate the Federal Reserve System or increase scrutiny of the Fed's accounting records. For these reasons, the federal reserve is not independent of government. However, the Federal Open Market Committee meets behind closed doors. Its meetings are never broadcast. The president or Congress does not order the Federal Reserve to pursue some specific course of action. Once a Fed governor is confirmed by the Senate, a president cannot decide to remove the governor from his or her position. In this way, the Federal Reserve operates Independently with government.

Institutions can make small transfers using:

Automated clearinghouse services

Financial transactions can be processed much more quickly than in the past because:

Fewer payments involve checks. banking institutions allow customers to deposit checks with their smartphones. electronic images of checks are sent people increasingly rely on debit cards and credit cards.

A banking system in which only fraction of bank deposits are backed by actual cash on hand and are available for withdrawal is known as:

Fractional reserve banking.

Federal Deposit Insurance Corporation. This ___ part of the Federal Reserve System.

Is not.

General services Administration. This ____ part of the Federal Reserve System.

Is not.

When the bank issues you a long, it is essentially creating___.

Money

Office of Comptroller of the Currency apart of the Federal Reserve System?

No

U.S Treasury apart of the Federal Reserve System?

No

The Federal Reserve Board of Governors:

Oversees research into domestic and international financial conditions. Investigates the health of the economy.

The Fed provides banks with financial services by:

Receiving and delivering the currency. transferring funds.

The Federal Reserve:

Regulates member banks to promote stable prices and economic growth.

Discount rate

The interest rate at which banks can borrow money directly from the Federal Reserve.

Open Market operations

The purchase or sale of government securities by a central bank; a key tool of monetary policy used to influence the money supply and interest rates.

Every dollar bill has a few things in common. These include:

The words Federal Reserve Note are at the top. A circular emblem with a letter inside and the location of the issuing Federal Reserve Bank is on the left hand side.

The Federal Reserve is so powerful that statements made can affect stocks halfway around the world.

True

Federal Open Market Committee apart of the Federal Reserve System?

Yes

Is the Board of Governors part of the Federal reserve system.

Yes

If someone deposits money into a checking account,

assets and liabilities both increase.

A _______ is a financial instrument that obligates a borrower to repay money, with interest, to a lender.

bond

The interest rate at which banks can borrow money directly from the Federal Reserve is called the:

discount rate.

A ____ of the money in an economy is issued by the Federal Reserve; the rest is created by banks.

fraction

Depository Institutions. This ___ part of the Federal Reserve System.

is

Federal Financing Bank. This ____ part of the Federal Reserve System.

is not.

The Federal Reserve Board of Governors:

oversees research into domestic and international financial conditions. Investigates the effect of banking laws.

The Federal Open Market Committee include the Board of Governors, the ___ of the New York Fed, and ___ federal reserve bank presidents from other district banks, who serve on a rotating basis.

president, 4

The FED operates independently within the government, but not independent of it because new members are appointed by:

the president of the United States and confirmed by the Senate.

Every ___ years, a new member is appointed to the Federal Reserve Board of Governors.

two

Institutions can transfer large amounts of money in a timely and efficient way using

wire transfers

The Financial Management Service. This ___ part of the Federal Reserve System.

is not.

Today, the Federal Deposit Insurance Corporation insures accounts up to

$250,000

Central bank

A bank that provides financial services to a country's government and is responsible for the nation's monetary policy. The central bank of the United States is the Federal Reserve.

The Federal Reserve is a Central Bank.

Central banks do not make loans to you, to households, or to businesses other than banks. Instead, and important role of central banks is to make loans to banks that fall short of funds.

As the bank for the federal government the FED:

Collects federal tax payments processes US savings bonds processes postal money orders.

The Federal Reserve is not independent of government because:

The Senate either confirms or rejects a nominated Federal Reserve governor. Congress can decide to increase scrutiny FEDS accounting records. The chairperson of the Federal Reserve Board of governors is required to testify before congress. Congress can decide to terminate the Federal Reserve System.

Monetary Policy

The actions taken by a country's central bank to influence the supply of money and credit in the economy.

Federal Reserve System

The central bank of the United States, consisting of 12 regional banks and the Board of Governors. The Federal Reserve System conducts monetary policy, supervises and regulates banks, monitors the stability of the financial sector, and provides financial services to the U.S. government.

One of the Feds most important jobs is supervision and regulation of member banks to prevent banking panicks or distruptions. This is accomplished through:

The creation of regulations and guidelines. regular inspections

Reserve Requirement (rr)

The fraction of checkable deposits that banks must keep on hand as reserves, either as currency or on deposit with the Federal Reserve.

Federal Reserve Board

The governing organization of the Federal Reserve System; also known as the Board of Governors. The Board consists of seven members who are appointed by the president and confirmed by the Senate to serve 14-year terms of office.

The Federal Reserve is concerned that sluggish economic activity. It believes an increase in the money supply of $100 billion will be adequate to allay any fears of recession. The FOMC should _____ bonds. With a reserves requirement of 10% the money multiplier is _____. If the money supply needs to increase by $100 billion, the FED must ______ in bonds.

buy, 10, buy $10 billion

Monetary policy affects interest rates which in turn, affects

investment, employment, economic growth, inflation.

Is office of Management and Budget apart of the Federal Reserve System?

no

An increase in the money supply, designed to stimulate economic activity, is called _______ monetary policy.

expansionary

Fractional reserve banking

A banking system in which banks have to keep only a fraction of checkable deposits on hand and available for withdrawal.

Federal; Open Market Committee (FOMC)burn

A committee of the Federal Reserve System that is responsible for monetary policy decisions, specifically for open market operations for the Federal Reserve System. The FOMC consists of the Federal Reserve Board, the president of the New York Fed, and 4 of the 11 regional bank presidents.

The ___ serves as the bank for the federal government.

FED

The Federal Reserve is independent of government because:

Federal Open Market Committee Meets behind closed doors. Once a FED governor is confirmed by the senate, a president cannot decide to remove the governor from his or her position.

The Federal Reserve changes the amount of money in circulation by:

Using open market operations to buy and sell government debt (U.S. Treasury bonds)

The federal reserves is concerned about accelerating inflation and wants the money supply to decrease by $20 billion. The FOMC should ______ bonds. With a reserve requirement of 10% the money multiplier is ______. If the money supply needs to decrease by $20 billion, the Fed must _______ in bonds.

sell, With the reserve requirement of 10%, the money multiplier is 1/rr=1/0.1=10, The FED must sell $20 billion/10=$2 billion in bonds.