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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 |