Splash Screen. Chapter Introduction Section 1: Organization and Functions of the Fed Section 2: Money Supply and the Economy Section 3: Regulating the Money Supply Visual Summary. Chapter Menu.
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Governments strive for a balance between the costs and benefits of their economic policies to promote economic stability and growth.Chapter Intro 1
In this chapter, read to learn about who is in charge of the U.S. money supply and how they decide how much currency to put into circulation.Chapter Intro 2
View:Organization of the FedSection 1
View:The Federal Reserve SystemSection 1
View:Balancing Monetary PolicySection 2
View:Raising and Lowering Reserve RequirementsSection 3
View:Federal Funds RateSection 3
The primary function of the Federal Reserve Systemis to control the money supply, but it has other responsibilities as well.VS 1
The Fed can implement either a loose or tight money policyto try to promote economic growth and employment.VS 2
The Fed has several tools at its disposal to use to regulate the money supply.VS 3
Fed:the Federal Reserve System created by Congress in 1913 as the nation’s central banking organizationVocab1
monetary policy:policy that involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of creditVocab2
Federal Open Market Committee (FOMC):12-member committee in the Federal Reserve System that meets 8 times a year to decide the course of action that the Fed should take to control the money supplyVocab3
check clearing:method by which a check that has been deposited in one institution is transferred to the issuer’s depository institutionVocab4
loose money policy:monetary policy that makes credit inexpensive and abundant, possibly leading to inflationVocab5
tight money policy:monetary policy that makes credit expensive and in short supply in an effort to slow the economyVocab6
fractional reserve banking:system in which only a fraction of the deposits in a bank is kept on hand, or in reserve; the remainder is available to lendVocab7
reserve requirements:regulations set by the Fed requiring banks to keep a certain percentage of their checkable deposits as cash in their own vaults or as deposits in their Federal Reserve district bankVocab8
discount rate:interest rate that the Fed charges on loans to commercial banks and other depository institutionsVocab9
prime rate:rate of interest that banks charge on loans to their best business customersVocab10
federal funds rate:interest rate that banks charge each other on loans (usually overnight)Vocab11
open-market operations:buying and selling of United States securities by the Fed to affect the money supplyVocab12
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