M&B Chapter 16: The Federal Reserve System
midwest
12 FRB's: There are a disproportionately large number of regional FRB's in the ______________.
Board of Governors (BG) 12 Regional Federal Reserve Banks (12 FRB) Federal Open Market Committee (FOMC)
3 components of the fed: 1. 2. 3.
board of governors
An independent agency of the federal government
raises money supply decreases interest rates
Buying us treasury securities does what to MS and IR?
Bank of North America in Philadelphia
First central bank?
5
How many of the regional Federal Reserve Bank presidents can vote in the FOMC?
RRR
IR has an inverse relationship with what?
sell
If you want to increase interest rates, you would instruct the FOMC to ___________(buy/sell) the US treasury securities
all profit must be given back to the U.S. treasury because they are not-for-profit!!
In the 12 FRB's, what do they have to do with their profit?
IR
MS has an inverse relationship with what?
NY FRB ny has the big banks, so it monitors them
Monitors and supervises many largest commercial and investment banks in the district whose health critically determines the state of the U.S. economy
NY FRB
Represents US as it's central bank stores gold in it's vault
The bank of the united states
Second central bank?
lowers money supply increases interest rates
Selling us treasury securities does what to MS and IR?
true
T/F the fed's chairperson of the Board-of-Governors has a 4 year renewable term
False
T/F there is a Fed Bank located in washington, DC
false
T/F: the Fed has to receive its annual budget from congress
false
T/F: the federal reserve system should encourage debt monitizing
when the fed increases the RRR, banks cant loan as much and MS Goes down. therefore, there is less liquidity and higher IR's
The FED decides to increase RRR for the banks, this will cause ________ liquidity and thus, will result in _______ IR.
New York
The FOMC is operated out of ___________ federal reserve bank
RRR
The Fed can increase or decrease the ___________ to conduct monetary policy
when the fed decreases the RRR, banks can loan more out and MS goes up. therefore, there is more liquidity and less IR
The Fed decides to decrease RRR for the banks, this will cause _______- liquidity and thus, will result in ________ IR.
closer to $100 billion
The Fed has been making profits of ________ in recent years
not for profit zero
The Fed is a __________ organization and thus, its closing financial statement must show a ________ profit.
federal government
The board is a U.S. _______________, located in Washington DC
debt longterm economic
The debate for Fed independence: For: no _________ monetizing with a __________ view of economy Against: coherent _________ policies are needed
monetary
The fed carries out __________ policy with 3 tools.
reserve requirements discount loans OMO-- open market operations
The fed carries out monetary policy using 3 tools: 1. 2. 3.
The federal reserve act
The national banking act was passed before what?
Federal Reserve banks FRBs
The operating arms of the federal reserve system and are supervised by the board of governors *there are 12*
C. Secretary of the U.S. treasury Department
The voting members of the FOMC do not include: a. the vice chairperson of the Federal Reserve Board b. The president of the New York Federal Reserve Bank c. the Secretary of the U.S. Treasury Department
second bank of the united states
Third central bank?
it means they are paying money to banks banks have more money (MS goes UP) IR is lower
What does it mean if the fed "buys" T- Securities from primary dealers? What happens to the MS/IR?
Interest rates go DOWN (More money is available at the bank. more lending. more money in the public's hands. MS INCREASES. IR goes down)
What happens to the interest rate when the fed increases the amount of DL's to member banks?
decrease higher
When the Federal Reserve Banks cut down (or reduce) on discount loans to banks, this will tend to _________ MS and thus, will result in __________ IR
More money is kept at the bank Less lending MS goes down IR goes UP!!!!!!
When the fed increases the reserve requirements, ________ (less/more) money is kept at the bank and thus, __________(less/more) lending, less money in the public's hands (MS goes up or down?) What happens to the interest rate?
BUY MAKE
When the fed wants to DECREASE IR, they can: ______________ the US treasury securities & ____________ discount loans to banks
increase lower
When the federal reserve banks make discount loans liberally to banks, this will tend to ___________ MS and thus, will result in __________ IR
US treasury department
When the federal reserve system makes profits, it must return profits to who?
New York FRB
Which is the most important of all 12 regional federal reserve banks?
all of the above
Which of the following functions does each of the 12 regional federal reserve banks play? a. examine bank holding companies b. collect data on local business conditions c. conduct research on economic affairs d. all of the above
A. The fee income from check clearing and wire-transfer services
Which of the following is a source of income to the FED? a. the fee income from check-clearing and wire-transfer services b. the collection of taxes from member banks c. The fee income from granting bank charters
appointed by the president
Who appoints the chair and vice chair of the board of directors?
12 FRBs
Who establishes the discount rate?
12 FRB's Board of governors
Who establishes the discount rates? Who reviews and determines them?
board of governors
Who organizes the 12 FRB's?
board of governors
Who sets reserve requirements?
no
are the 12 FRB's a government entity?
not-for-profit
are the 12 FRB's for or not-for profit?
NY FRB
can trade in the foreign exchange market for exchange rate stability at the request of the US department of treasury
FOMC
consists of the members of the board of governors and reserve bank presidents
of the 12 FRB's
each ____________ has their own board of directors with 9 members. 6 of them are elected by member banks in their own region and 3 of them are appointed by ___________________
Federal reserve system
fourth central bank?
7 14 years but if someone expires and someone takes their place, they can serve more than 14 years
how many members of the board of governors are there? How long is their term?
OMO
out of the three tools the FED uses to carry out monetary policy, which one is the main tool?
NY FRB
the ______________ monitors and supervises large banks, represents US as its central bank to the rest of the world, and is a member of the BIS.
RRR Cannot loan this money out
the fed requires member banks to hold minimum required reserves at a rate of about 10% of the checking account balance in form of readily available cash. What is this called?
discount loan
the loan given to banks by the federal reserve bank
7
there are ______ members of the Board of Governors at the FED
Discount Loan borrower lender
this is a loan given to member banks at their request by the FRB. usually use this as a last resort-- at the request of the ____________. NOT the will of the __________ reasonably weak monetary policy
It means they are trying to increase the IR by DECREASING the money supply.
what does it mean if the fed "sells" T-Securities from primary dealers? what happens to MS/IR
12 FRBs
who approves the discount loan?
12 FRBs
who clears checks and destroys worn-out money?
FOMC federal open market committee
who directs open market operations?
Board of governors
who implements monetary policy via coordination the federal reserve banks and FOMC?
board of governors
who is the brain of the fed?
congress
who oversees the federal reserve system and its entities?
FOMC
who's main charge is to regulate the federal funds rate for price stability and full employment? *important because when the federal funds rate is changed, it impacts our economy and the global economy so significantly*
