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Terms- Unit 5
The Federal Reserve and Monetary Policy
| Question | Answer |
|---|---|
| purpose of federal reserve system | promote economic growth using full employment and price stability |
| ways federal reserve system accomplishes | regulating, supervising, and examining the banking system; stabilizing and limiting risk to the financial system; provide financial services for the federal government and banking commercial banks |
| monetary policy | actions taken by the central bank to manage interest rates and the money supply in pursuit of macroeconomic goals |
| bank holding companies | control one or more banks |
| fiscal agent | sells, redeems, and pays interest on government securities |
| check clearing | the processes of removing money from the bank account of the person who wrote the check and delivering it to the account of the check's recipient |
| ACH (automated clearing house) transfers | transfers between payers' and payees' accounts carried out without the use of checks on a secure electronic funds-transfer network |
| monetary policy | meant to moderate the peaks and valleys of business cycles |
| easy money policy | increase the money supply |
| tight money policy | decreases the money supply |
| to increase interest rates | sell treasuries |
| to decrease interest rates | buy treasuries |
| federal funds rate | interest rate that commercial banks charge one another for short-term loans |
| discount rate | interest rate that the Fed charges financial institutions for short-term loans |
| Reserve Requirements | percentage of demand deposits that banks must keep |