Chapter 2 Terms Flashcards
A financial institution that facilitates the exchange of funds between savers and spenders by taking in funds from savers and then lending those funds to borrowers and investors.
Financial Intermediary
A tool of monetary policy in which banks borrow funds from the Federal Reserve. These loans, priced at the discount rate, help reduce liquidity problems for banks and maintain stability of financial markets.
Discount Operations
The management of the money supply and interest rates by the Federal Reserve Bank to ensure the availability of credit in quantities and at interest rates consistent with specific economic objectives.
Monetary Policy
the purchase and sale of U.S. Treasury and federal agency securities by the Federal Reserve to control the amount of the nation’s money supply. They are the principle means by which the Federal Reserve implements monetary policy.
Open Market Operations
The interest rate charged to banks by the Federal Reserve on loans to member commercial banks.
Federal Discount rate
The rate banks charge one another for overnight loans of reserve funds held at the Federal Reserve banks
Federal Funds Rate
the interest rate a bank offers its most creditworthy customers and the base rate used to set interest rates for other loans
Prime Rate
A business organization treated as a legal entity and owned by a group of shareholders (stockholders). The shareholders elect the directors, who serve as the governing body managing the corporation’s affairs.
Corporation
The governing body of corporation ultimately responsible for its financial performance, consisting of individual directors elected by the shareholders.
Board of Directors
A bank that has been in operation for 5 years of less. Commercial banks operating for five years or less that convert to Federal reserve membership are subject to the de novo bank application and supervision standards.
De Novo Bank
