Chapter 2 - Federal Fiscal & Monetary Policy
Federal Reserve Bank
Each of the 12 Federal Reserve Districts has one main ______ ______ _____.
9, 6, 3
Each reserve bank has a ___-member board of directors. ____ of the directors are elected by the stockholders and ___ are appointed by the Fed's Board of Governors.
executive branch, legislative branch
Fiscal policy is determined by the government's _______ ______ (the president and the administration) and the _______ _______ (congress).
250,000
If only one spouse meets both the ownership test and the use test, the maximum exclusion the married couple can claim is $_______, even if they file a joint return.
National Bank Act
In 1863, the Congress passed the ______ ____ ____, which established basic banking regulations and procedures for supervising commercial banks.
reduced
In special circumstances, taxpayers who owned and used a principal residence for less than 2 years my be able to claim a ______ exclusion.
1913, 1916
In the Federal Reserve Acts of ____ and _____, Congress created the Federal Reserve System and established the modern banking system.
Federal Reserve System
Monetary policy is set and implemented by the ______ ______ ______.
securities, federal open market committee
Open market operations are conducted by the ________ Department of the Federal Reserve Bank of New York (often referred to as the "Trading Desk"), following directives from the ______ _____ _______ ________.
depreciation
Owners of income property, such as apartment buildings and rental homes, are allowed to take ________ deduction (also called cost recovered deductions).
tax laws, budget
The 2 branches establish the federal ____ ____, which generate the government's largest source of income, and the federal _______, which determines how the money will be spent.
8, 12, 7, 4
The FOMC has ___ regularly scheduled meetings per year. It consists of ___ members; the ___ members of the Federal Reserve Board, the president of the New York Federal Reserve Bank, and ___ other Reserve Bank presidents.
open market operations
The Fed also buys and sells government securities. These transactions are called _____ ______ ______.; The most important tool for controlling the money supply.
New Deal
The Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation were created as part of the ____ ____.
Board of Governors
The Federal Reserve System is controlled by the seven-member ______ __ ______, known as the Federal Reserve Board.
U.S. Treasury Department
The ____ ______ ________ carries out the fiscal policy; it is responsible for managing the federal government's finances, including the national debt.
Federal Reserve System
The ______ ______ ______ would regulate commercial banks, perform periodic bank examinations, and impose reserve requirements.
lower
The ______ the interest rates, the more encourage people are to borrow money for both business and personal purposes.
lender
The factor that has the biggest impact on the cost of borrowing money is the interest rate charged by the ______.
U.S. President, 14
The governors are appointed by the ____ _______ and confirmed by the Senate for ___-year terms.
10
The requirements are set by the Federal Reserve Board and may reach ___%, depending on the amount of deposits at the institution.
Federal Reserve Districts
To prevent one area of the country rom having disproportionate power on the board, the governs must be chosen from different _______ _______ ________.
checks and balances
To prevent the centralization of too much power, Congress included _______ ___ _______ in the Federal Reserve System.
2
To quality for the exclusion, the taxpayer must have been owned and used the property as a principal residence for at least ____ years during the five-year period before its sale.
1. discount rate 2. funds rate
What are the 2 key interest rates the fed has control over?
1. fiscal policy 2. monetary policy
What are the 2 ways the cost of borrowing money is influenced by the federal government?
1. reserve requirements 2. interest rates 3. open market operations
What are the 3 main tools the Fed uses to implement its monetary policy and influence the economy?
low
When taxes are _____, taxpayers have more money to lend and invest.
high
When taxes are _____, taxpayers not only have less money to lend or invest, they are also more likely to invest what money they do have in tax-exempt securities instead of taxable investments.
increases
When the Fed buys government securities, it ______ the money supply.
decreasing
When the Fed sells government securities, the money the buyer uses to pay for the securities is taken out of circulation, ________ the money supply.
federal deficit
When the federal government spends more money than it takes in (through taxation and other income sources), a shortfall known as the ______ _____ results.
bills, notes, inflation-protected, bonds
When there is a deficit the Treasury obtains funds to cover the shortfall by issuing interest-bearing securities for sale to investors referred to as Treasury ____ (one year or less), Treasury _____ (two to ten years), Treasury ______-______ securities (five to thirty years) or Treasury ______ (thirty years).
inflation
a trend of general price increases throughout the economy.
Federal Reserve Bank
an incorporated banking institution owned by the member commercial banks in the district.
fiscal policy
government actions in raising revenue through taxation, spending money, and financing budget deficits
monetary policy
government actions to control the money supply and the cost of money.
federal funds rate
the interest rate banks charge each other for overnight loans; not set directly by the Fed
discount rate
the interest rate charged when a bank borrows money from one of the Federal Reserve Banks to cover a shortfall in funds.
increase, decrease
A decrease in reserve requirements tends to _______ funds available for lending and _______ interest rates.
1
A reduced exclusion would be allowed if a home was sold after only ___ year because of a change in the taxpayer's health or place of employment, or because of some other unforeseen circumstances.
1,000,000, 500,000
A taxpayer generally can deduct all of the interest paid on loans for buying, building, or improving first and second residences, as long as the loans don't add up to more than $_________ ( $________ for a married taxpayer filing separately).
250,000, 500,000
A taxpayer who sells her principal residence may exclude a gain of up to $_______, or up to $________ for married couples filing a joint return.
decrease, increase
An increase in reserve requirements tends to _______ available loan funds and _______ interest rates.
lower
An increase in the money supply is supposed to lead to ______ interest rates.