Economics Chapter 17 The Federal Reserve System and Monetary Policy

monetary policy

-actions taken by the central bank to manage interest rates and the money supply in pursuit of macroeconomic goals

collateral

-an asset that must be forfeited to the lender if the loan is not paid back

bailout

-an infusion of money, usually in the form of loans or stock purchases, to keep a firm from failing

foreign reserves

-are deposits of foreign currencies held by central banks

bank holding companies

-companies that control one or more banks

tight money policy

-decreases the money supply

Federal Reserve Banks

-implemented Federal Reserve policies and provide services to member banks and federal government agencies

easy money policy

-increases the money supply

Federal Reserve System

-is the U.S. central banking system

Federal open market committee

-is the group within the Federal Reserve that creates monetary policy

member banks

-of the Federal Reserve System include all nationally chartered banks and many state-chartered banks; they are stockholders in their district bank and help elect the district's board of directors

board of governors

-of the Federal Reserve is made up of seven members appointed by the president and manages the operations of the Federal Reserve

inflation targeting

-the central bank sets a target rate-or range- of inflation for some time in the future and develops monetary policy with that goal in mind

fiscal agent

-the federal government, the Fed sells, redeems, and pays interest on government securities

federal funds rate

-the interest rate that commercial banks charge one another for short-term loans

discount rate

-the interest rate that the Fed charges financial institutions for short-term loans

check clearing

-the processes of removing money from the bank account of the person who wrote the check-the payer-and delivering it to the account of the check's recipient-the payee

ACH (automated clearing house) transfers

-transfers between payers' and payees' accounts carried out without the use of checks on a secure electronic funds transfer network