Money, Banking, and Monetary/Fiscal Policy Flashcards
What is the function of money?
Common means of exchange for goods/services
Measure of value- measure for assigning value
Store value- Retains value over time to be used in future
The fed provides three measures of money …:
m1 , m2, m3
What is M1?
Narrowest deflation- instruments used to carry out transactions (paper or coin currency held outside banks)
What is M2?
Includes paper coin, money market, certificates of despots, individual-owned money market mutual funds
What is M3?
Items in M2, plus Certificates of deposits greater than $100,000
Institutional-owned money market mutual funds
What is the board of governs?
Seven member policy making body of Federal Reserve System
What is the Fed-Open market Committee?
Twelve-member body responsible for implementing monetary policy to effect money supply through open-market operations
What are the federal reserve banks?
Twelve district banks responsible for a geographical area
What is monetary policy?
Managing money supply to achieve national economic objectives
- Economic growth
- Price level stability
What is the reserve requirement for banks?
Percentage of loans made by banks that they must hold in reserve
Increase in reserve- decreases loans
What is the Fed Open Market Operations?
Fed buying and selling US treasury debt with member banks
- Buying US Treasury debt from member banks = increases funds available for banks to loan
Buying debt from member banks - increases money supply
Sells debt to member banks - decreases money supply
What is the FED discount rate?
Increasing discount rate= reduced borrowing and reduced money supply
Decreasing discount rate- increase borrowing and increased money supply
