Macro Test 4

is the seven members appointed by the president and confirmed by the U.S. Senate who serve for one nonrenewable 14-year term. Their responsibility is to supervise and control the money supply and the banking system of the United States.

. Board of Governors of the Federal Reserve System

Changes in the _______ occur when the fed changes the rate of interest it charges on loans of reserves to banks.

Discount rate

Allows a bank to create money by exchanging loans for deposits

Excess reserves

is the government agency established in 1933 to insure commercial bank deposits up to a specified limit.

Federal Deposit Insurance Corporation (FDIC)

directs the buying and selling of U.S. government securities, which is a key method of controlling the money supply.

Federal Open Market Committee (FOMC)

is our central bank and was established in 1913.

Federal Reserve System

The _______ is a private market in which banks lend reserves to each other for less than 24 hours.

Federal funds market

The interest rate banks charge for overnight loans of reserves to other banks is called

Federal funds rate

________ is the basis of banking today and originated with the goldsmiths in the Middle Ages

Fractional reserve banking

Action taken by the fed to change the money supply is called

Monetary policy

The _______ is the maximum change (positive or negative) in checkable deposits (money supply) due to a change in excess reserves.

Money multiplier

are the buying and selling of government securities by the fed through its trading desk at the New York federal reserves.

Open market operations

The percentage of deposits held required reserves is called the

Required reserve ratio

The minimum balance that the Fed requires a bank to hold in vault cash or deposit with the fed is called the

Required reserves

is the direct exchange of one good for another good, rather than for money.

barter

is money that has a marketable value, such as gold and silver. Today, the United States uses fiat money that must be accepted by law, but is not convertible into gold, silver, or any commodity.

commodity money

The ________________ is the legislated legal limit on the national debt

debt ceiling

is a burden because it is the portion of the national debt a nation owes to foreigners. When interest is paid on this type of debt, this income transfers purchasing power to other nations.

external national debt

Money accepted by law and not because of redeemability or intrinsic value is called

fiat money

The percentage of the national debt a nation owes to its own citizens is called

internal national debt

is the most important function of money. This means that money is widely accepted in payment for goods and services.

medium of exchange

can be anything that serves as a (1) medium of exchange, (2) unit of account, and (3) store of value.

money

The _______________ is the dollar amount that the federal government owes holders of government securities. It is the cumulative sum of past deficits

national debt

is the property of money to hold its value over time. Money is said to be highly liquid, which means it is readily usable in exchange.

store of value

is the function of money to measure relative values by serving as a common yardstick for valuing goods and services.

unit of account