Unit 4 Chapter 11: Central Banking Flashcards
Who Creates money in the United States?
The U.S. Treasury
Who controls how much money is printed in the United States?
The Federal Reserve
Define the term: Central Bank
The governments bank which they use to control the nations finances through the bank’s various functions
How many districts are set up under the Federal Reserve?
12
Who controls most of the functions of the Fed?
The Board of governors
How many people sit on the Board of Governors?
7
How often is a member of the Board of Governors nomiated/confirmed?
2 Years
Define the Term: Reserve Requirement
The amount of money banks are required to keep on hand in proportion to their deposits, set by The Fed
What are the three ways that the Fed is independent
Politically - Packing the fed/board is difficult as one is appointed every 2 years and Presidential terms are 4
Financially - Sets its own budget apart from congress
Operationally - Makes its own decisions apart from the three branches of Govt
Define the Term: Federal Open Market Committee
Part of the Fed that impacts the money supply by buying and selling government securities
Define the Term: Securities
Equity (ownership in a firm)
Debt
Hybrid (Equity and debt combined)
What are the functions of the Federal Reserve system?
Providing a uniform/elastic currency Regulating Member Banks Clearing Checks Acting as the governments bank Acting as a bankers bank
What are the three ways that the Fed can impact the money supply through creation of money?
Changing the discount Rate, or the interest on money lent to banks
Changing the reserve requirement
Buying/Selling securities
Define the term: Monetary policy
Government policy that controls increasing and decreasing the money supply
What happens when the Fed raises interest rates?
Borrowing becomes more expensive and the economy risks contraction, deflation, and unemployment
