Econ chapter 6
Interest
A price paid for borrowed money
mortgage
A real-estate loan,
How does the federal reserve increase and decrease the money supply
Buying and selling bonds
Which of the following statements about M1 assets is true? A. M1 assets cannot be converted into cash easily. B. M1 assets are stored in savings accounts. C. M1 assets can be converted into cash easily. D. M1 assets do not have liquidity.
C. M1 assets can be converted into cash easily.
M1
Cash, coins (most liquid form of money) Money you can gain access to easily and immediately
What is the federal open market committee (FOMC)?
The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System. The FOMC is composed of 7 members of the Board of Governors and 5 of the 12 Reserve Bank presidents.
Principal
The amount of money borrowed (Take out a mortgage, $400,000 is the principal )
Twelve Federal Reserve Banks
The federal reserve act divided the United States into 12 Federal reserve districts, each of these banks monitors and reports on economic and banking conditions in its district 9 person board
Creditor
The person whom you owe money
Who is on the FOMC?
The seven governors from the Board and 5/12 presidents of the Reserve Banks.
True or false is the federal reserve privately owned and publicly controlled ?
True
Fractional reserve banking
a banking system that keeps only a fraction of funds on hand and lends out the remainder
bank holding company
a company that owns more than one bank
How many Federal Reserve Districts are there?
12 districts
Debit card
A bank card that automatically deducts the amount of a purchase from the checking account of the cardholder
Jerome Powell
Current Chairman of the Federal Reserve
What is the purpose of the : Board of Governors
In the Federal Reserve System, a seven-member board that makes most economic decisions regarding interest rates and the supply of money. One is chosen as the chair person for a 4 year renewable term (Jerome Powell) Appointed by president 14 year staggered terms : stability
federal funds rate
Interest rate banks charge each other for loans
What is the federal reserve act of 1913 ?
It established the Federal Reserve (central bank) to oversee monetary policy in the U.S. to create economic stability.
M2
M1 plus savings accounts, certificates of deposit, and other liquid assets (Harder to convert to cash) Also know as "near money"
Who is required to join the federal reserve system
National chartered banks
Which president of the FOMC is a permanent member
President of New York district bank
Functions of a central bank
Regulate the money supply Buy and sell bonds, control inflation, ensure credit, unemployment
Financial panic
a sudden, drastic, widespread economic collapse
demand deposits
balances in bank accounts that depositors can access on demand by writing a check
Member banks........
bank that belongs to the Federal Reserve System, national chartered banks
Reserves
deposits that a bank keeps readily available as opposed to lending them out
Default
failure to pay back a loan
How does the president of the Federal Reserve Bank of New York differ from the other Federal Reserve Bank presidents?
has permanent seat on FOMC
Credit cards
means of access to preapproved lines of credit granted by a bank or finance company
Monetary policy
the actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy (controlling money supply, buying and selling bonds)
Reserve requirements
the amount of reserves that banks are required to keep on hand
Liquidity
the ease with which an asset can be converted into cash
discount rate
the interest rate that the Federal Reserve charges commercial banks for loans
Money supply
the quantity of money available in the economy
