Chapter 16 The Federal Reserve and Monetary Policy
Federal Reserve Districts
12 banking districts created by the Federal Reserve Act.
Bank Holding Company
A company that owns more than one bank
Thrift Institution
A financial institution that serves savers.
Expansionary Monetary Policy
A plan to increase the money supply.
Contractionary Monetary Policy
A plan to reduce the money supply.
Monetary
A term that means "relating to money."
Monetarism
A theory that holds that rapid changes in the money supply cause economic instability.
Bank Exam
An audit of a bank's financial practices.
Tight-money Policy
Another name for contractionary monetary policy.
Easy-money Policy
Another name for expansionary monetary policy.
Currency
Coins and paper money.
Federal Open Market Committee (FOMC)
Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money supply.
Wage and Price Controls
Government limits on increases in wages and prices.
Deposit Multiplier Formula
Tells how much the money supply will increase after an initial cash deposit.
Monetary Policy
The actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy.
Federal Reserve System
The central bank of the United States.
Required Reserve Ratio (RRR)
The fraction of a bank's deposits required of banks by the Federal Reserve
Federal Funds Rate (FFR)
The interest rate that banks charge one another to borrow money.
Prime Rate
The interest rate that banks charge their best customers.
Discount Rate
The interest rate that the Federal Reserve charges when it lends money to other banks.
Central Bank
The nation's main monetary authority.
Check Clearing
The process by which banks record whose account gives up money and whose account receives money when a customer writes a check.
Federal Advisory Council (FAC)
The research arm of the Federal Reserve.
Open Market Operations
The sale and purchase of federal government securities.
Board of Governors
The seven-member board that oversees the Federal Reserve System.
Net Worth
Total assets minus total liabilities
Money Creation
the process by which money enters into circulation
