M&B Chapter 16: The Federal Reserve System

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midwest

12 FRB's: There are a disproportionately large number of regional FRB's in the ______________.

Board of Governors (BG) 12 Regional Federal Reserve Banks (12 FRB) Federal Open Market Committee (FOMC)

3 components of the fed: 1. 2. 3.

board of governors

An independent agency of the federal government

raises money supply decreases interest rates

Buying us treasury securities does what to MS and IR?

Bank of North America in Philadelphia

First central bank?

5

How many of the regional Federal Reserve Bank presidents can vote in the FOMC?

RRR

IR has an inverse relationship with what?

sell

If you want to increase interest rates, you would instruct the FOMC to ___________(buy/sell) the US treasury securities

all profit must be given back to the U.S. treasury because they are not-for-profit!!

In the 12 FRB's, what do they have to do with their profit?

IR

MS has an inverse relationship with what?

NY FRB ny has the big banks, so it monitors them

Monitors and supervises many largest commercial and investment banks in the district whose health critically determines the state of the U.S. economy

NY FRB

Represents US as it's central bank stores gold in it's vault

The bank of the united states

Second central bank?

lowers money supply increases interest rates

Selling us treasury securities does what to MS and IR?

true

T/F the fed's chairperson of the Board-of-Governors has a 4 year renewable term

False

T/F there is a Fed Bank located in washington, DC

false

T/F: the Fed has to receive its annual budget from congress

false

T/F: the federal reserve system should encourage debt monitizing

when the fed increases the RRR, banks cant loan as much and MS Goes down. therefore, there is less liquidity and higher IR's

The FED decides to increase RRR for the banks, this will cause ________ liquidity and thus, will result in _______ IR.

New York

The FOMC is operated out of ___________ federal reserve bank

RRR

The Fed can increase or decrease the ___________ to conduct monetary policy

when the fed decreases the RRR, banks can loan more out and MS goes up. therefore, there is more liquidity and less IR

The Fed decides to decrease RRR for the banks, this will cause _______- liquidity and thus, will result in ________ IR.

closer to $100 billion

The Fed has been making profits of ________ in recent years

not for profit zero

The Fed is a __________ organization and thus, its closing financial statement must show a ________ profit.

federal government

The board is a U.S. _______________, located in Washington DC

debt longterm economic

The debate for Fed independence: For: no _________ monetizing with a __________ view of economy Against: coherent _________ policies are needed

monetary

The fed carries out __________ policy with 3 tools.

reserve requirements discount loans OMO-- open market operations

The fed carries out monetary policy using 3 tools: 1. 2. 3.

The federal reserve act

The national banking act was passed before what?

Federal Reserve banks FRBs

The operating arms of the federal reserve system and are supervised by the board of governors *there are 12*

C. Secretary of the U.S. treasury Department

The voting members of the FOMC do not include: a. the vice chairperson of the Federal Reserve Board b. The president of the New York Federal Reserve Bank c. the Secretary of the U.S. Treasury Department

second bank of the united states

Third central bank?

it means they are paying money to banks banks have more money (MS goes UP) IR is lower

What does it mean if the fed "buys" T- Securities from primary dealers? What happens to the MS/IR?

Interest rates go DOWN (More money is available at the bank. more lending. more money in the public's hands. MS INCREASES. IR goes down)

What happens to the interest rate when the fed increases the amount of DL's to member banks?

decrease higher

When the Federal Reserve Banks cut down (or reduce) on discount loans to banks, this will tend to _________ MS and thus, will result in __________ IR

More money is kept at the bank Less lending MS goes down IR goes UP!!!!!!

When the fed increases the reserve requirements, ________ (less/more) money is kept at the bank and thus, __________(less/more) lending, less money in the public's hands (MS goes up or down?) What happens to the interest rate?

BUY MAKE

When the fed wants to DECREASE IR, they can: ______________ the US treasury securities & ____________ discount loans to banks

increase lower

When the federal reserve banks make discount loans liberally to banks, this will tend to ___________ MS and thus, will result in __________ IR

US treasury department

When the federal reserve system makes profits, it must return profits to who?

New York FRB

Which is the most important of all 12 regional federal reserve banks?

all of the above

Which of the following functions does each of the 12 regional federal reserve banks play? a. examine bank holding companies b. collect data on local business conditions c. conduct research on economic affairs d. all of the above

A. The fee income from check clearing and wire-transfer services

Which of the following is a source of income to the FED? a. the fee income from check-clearing and wire-transfer services b. the collection of taxes from member banks c. The fee income from granting bank charters

appointed by the president

Who appoints the chair and vice chair of the board of directors?

12 FRBs

Who establishes the discount rate?

12 FRB's Board of governors

Who establishes the discount rates? Who reviews and determines them?

board of governors

Who organizes the 12 FRB's?

board of governors

Who sets reserve requirements?

no

are the 12 FRB's a government entity?

not-for-profit

are the 12 FRB's for or not-for profit?

NY FRB

can trade in the foreign exchange market for exchange rate stability at the request of the US department of treasury

FOMC

consists of the members of the board of governors and reserve bank presidents

of the 12 FRB's

each ____________ has their own board of directors with 9 members. 6 of them are elected by member banks in their own region and 3 of them are appointed by ___________________

Federal reserve system

fourth central bank?

7 14 years but if someone expires and someone takes their place, they can serve more than 14 years

how many members of the board of governors are there? How long is their term?

OMO

out of the three tools the FED uses to carry out monetary policy, which one is the main tool?

NY FRB

the ______________ monitors and supervises large banks, represents US as its central bank to the rest of the world, and is a member of the BIS.

RRR Cannot loan this money out

the fed requires member banks to hold minimum required reserves at a rate of about 10% of the checking account balance in form of readily available cash. What is this called?

discount loan

the loan given to banks by the federal reserve bank

7

there are ______ members of the Board of Governors at the FED

Discount Loan borrower lender

this is a loan given to member banks at their request by the FRB. usually use this as a last resort-- at the request of the ____________. NOT the will of the __________ reasonably weak monetary policy

It means they are trying to increase the IR by DECREASING the money supply.

what does it mean if the fed "sells" T-Securities from primary dealers? what happens to MS/IR

12 FRBs

who approves the discount loan?

12 FRBs

who clears checks and destroys worn-out money?

FOMC federal open market committee

who directs open market operations?

Board of governors

who implements monetary policy via coordination the federal reserve banks and FOMC?

board of governors

who is the brain of the fed?

congress

who oversees the federal reserve system and its entities?

FOMC

who's main charge is to regulate the federal funds rate for price stability and full employment? *important because when the federal funds rate is changed, it impacts our economy and the global economy so significantly*


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