Flashcards: Money, Banking and The Federal Reserve
All 23 terms
Terms | Definitions |
|---|---|
 The Federal Reserve | U.S. Central Bank; Purpose: to control the supply of credit and money to achieve stable prices, full employment, economic growth. |
| Open Market Operations | The buying and selling of Treasury Securities (Bonds) by the Federal Reserve in order to control the money supply |
| Reserve Requirement | the percentage of deposits that banking institutions must hold in reserve |
| Discount Rate | interest rate that the Fed charges for loans to member banks |
| Federal Funds Rate | the interest rate at which banks make overnight loans to one another |
| Monetary Policy | the actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy |
| Expansionary Monetary Policy | Federal Reserve system actions to increase the money supply, lower interest rates, and expand real GDP; an easy money policy = Buying Bonds, Lowering the Discount Rate and Reserve Requirement |
| Contractionary Monetary Policy | Contracting the supply of money and increasing interest rates to decrease Aggregate Demand and ultimately decrease inflation = Selling Bonds, Raising the Discount Rate and Reserve Requirement |
| M1 | a measure of the money supply |
| Money Multiplier | 1 / reserve requirement: the multiple by which the money supply will change because of a change in bank reserves |
| The Three Functions of Money | 1. medium of exchange 2.unit of account 3.store of value |
| Ben Bernanke | Current chairman of the Federal Reserve System. Replaced Alan Greenspan in 2006. |
| Fiscal Policy | an attempt to use taxes and expenditures to affect the economy |
| National Debt | the total amount owed by the federal government |
| Deficit | What occurs when the government in one year spends more money than it takes in from taxes. |
| Regressive Taxes | tax in which people with lower incomes pay a larger portion of their income |
| Proportional Taxes | taxes that require all income groups to pay the same percentage of their income in taxes |
| Progressive Taxes | A tax rate that increases as the amount of ones income increases |
| Economic Growth | increase in a nation's total output of goods and services over time |
| Aggregate Demand | the demand for all goods and services by all households, business, governments, and foreigners |
| Aggregate Supply | The total amount of goods and services in the economy available at all possible price levels. |
| Positive Externality | a benefit received by someone who had nothing to do with the activity that generated the benefit |
| Negative Externality | the harm, cost, or inconvenience suffered by a third party because of actions by others |