Ch. 16 terms

Question 1

Board of Governors

Answer 1

• -Serve 14 years
• –7 members on the board

*MOST IMPORTANT PARTY, deal with reserve requirements

Question 2

FOMC

Answer 2

Decides the discount rates

Question 3

History of Fed

Answer 3

–Alex Hamilt started 1st central bank, Jefferson was opposed.

–Started the wildcat banking era.

Question 4

Bank panic of 1907

Answer 4

–Heinz brother story intending on short squeeze gain.

JP morgan saved economy by investing $25 million into it.

Question 5

Problems that Fed dealt with

Answer 5

• -Bank instability (5 year avg. life span)
• -Inflation volatility
• -Business cycle fluctuations

Question 6

Evidence supporting FED

Answer 6

• 5 big bank panics in 50 years vs. 3 big bank panics post FED
• Low inflation

Question 7

Similarities and differences between US and euro banks

Answer 7

• Board of Gov = Executive board
• FOMC = governing council
• Regional banks = National central
• Target fed fun rate = Minimum-bid