Monetary Policy
the amount of interest banks charge on loans to their best business customers
prime rate
the method by which a check deposited in one institution is transferred to the issuer's depository institution
check clearing
anything used as a medium of exchange, unit of accounting, and store of value
money
True or False: The Federal Reserve is responsible for setting the interest rates that banks charge business.
False
In what year did Congress create the Federal Reserve System?
1913
when government makes credit expensive by keeping it in short supply in order to slow down the economy
tight monetary policy
Fed regulations requiring banks to keep a certain percentage of their deposits as cash
reserve requirements
government efforts to control the economy through the supply of money in circulation to affect the cost and availability of credit
fiscal policy
When the Fed uses “open market operations” to effect the supply of money in the economy, what could it be buying or selling?
US 30-year Treasury Bond
The Chairman of the Federal Reserve Board during the entire 1990s was:
Alan Greenspan
making money & credit more widely available to boost economic growth
loose monetary policy
a 12-member group of the Federal Reserve system that meets eight times a year to decide how the Fed should control the nation's money supply
Federal Open Market Committee
efforts to control the economy through government policies on taxing and spending
monetary policy
The Federal Reserve System was originally established to:
ensure a safe and uniform currency
Is considered to be the "Father of fiscal policy."
John Maynard Keynes
The Federal Reserve is responsible for:
monetary policy
The Federal Reserve can affect the money supply by:
changing reserve requirements
the buying/selling of US securities by the Federal Reserve to affect the money supply
open market operations
If the Federal Reserve adopts an expansionary (loose) monetary policy, what is the most likely result?
interest rates fall and credit is abundant
Which is larger, M1 or M2?
M2
A reserve requirement of 20 percent means that:
20 percent of a bank’s deposits must be kept on reserve
The number of district Federal Reserve banks in the United States is:
12
If the Fed was following a loose monetary policy and wanted to follow a similar fiscal policy, what would be a likely fiscal policy response from the US Government?
Raise taxes or cut spending
What happens during times of loose monetary policy>
Consumers buy more, businesses expand, credit is cheaper and abundant.
What person is known, more or less, as the “Father of monetary policy”?
Milton Friedman