Economics Chapter 15

The number of Federal Reserve banks in the United States is..

12

Federal Open Market Committee

12-member committee in the Federal Reserve System that meets 8 times a year to decide the course of action that the Fed should take to control the money supply.

Chairman of the Federal Reserve Board during the 1990s was..

Alan Greenspan

Open-Market Operations

Buying and selling of United States securities by the Fed to affect the money supply.

The Federal Reserve can affect the money supply by..

Changing reserve requirements

Federal Funds Rate

Interest rate that banks charge each other on loans (usually overnight).

Discount Rate

Interest rate that the Fed charges on loans to member banks.

If the Federal Reserve adopts an expansionary monetary policy

Interest rates fall and credit is abundant

Check Clearing

Method by which a check that has been deposited in one institution is transferred to the issuer's depository institution.

The Federal Reserve is responsible for..

Monetary policy in the United States

Tight Money Policy

Monetary policy that makes credit expensive and in short supply in an effort to slow the economy.

Loose Money Policy

Monetary policy that makes credit inexpensive and abundant, possibly leading to inflation.

Measuring the Money supply has become more difficult in recent years because..

More investment opportunities exist, and the use of credit cards has changed the way money circulates through the economy.

Which type of institution must belong to the federal reserve?

National banks

Monetary Policy

Policy that involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of credit.

Prime Rate

Rate of interest that banks charge on loans to their best business customers.

Reserve Requirements

Regulations set by the Fed requiring banks to keep a certain percentage of their deposits as cash in their own vaults or as deposits in their Federal Reserve district bank.

Fractional Reserve Banking

System in which only a fraction of the deposits in a bank is kept on hand, or in reserve; the remainder is available to lend.

The Fed

The Federal Reserve System created by congress in 1913 as the nation's central banking organization.