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The Fed
Monetary Policy
| Question | Answer |
|---|---|
| The rate the Federal Reserve charges for loans to commercial banks. | discount rate |
| The interest rate banks charge each other for loans. | federal funds rate |
| The process by which banks record whose account gives up money and whose account receives money when a customer writes a check. | check clearing |
| The Federal Reserve committee that makes key decisions about interest rates and the growth of the United States money supply. | Federal Open Market Committee (FOMC) |
| The 12 banking regions created by the Federal Reserve Act. | Federal Reserve Districts |
| The actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy. | monetary policy |
| The seven member body that oversees the Federal Reserve System. | Board of Governors |
| The process by which money enters into circulation. | money creation |
| The ratio of reserves to deposits required of banks by the Federal Reserve. | required reserve ratio (RRR) |
| The amount of new money that will be created with each demand deposit, calculated as 1/RRR. | money multiplier formula |
| The rate of interest banks charge on short-term loans to their best customers. | prime rate |
| The buying and selling of government securities to alter the supply of money. | open market operations |
| The monetary policy that increases the money supply. | easy (loose) money policy |
| The monetary policy that reduces the money supply. | tight money policy |