Federal Reserve System and Monetary Policy

These flashcards cover key terms and concepts related to the Federal Reserve System and monetary policy, useful for exam preparation.

Federal Reserve System (Fed)

The central bank of the United States responsible for setting monetary policy and regulating the banking system.

Monetary Policy

The process by which the Federal Reserve controls the supply of money, often targeting an inflation rate or interest rate.

Federal Open Market Committee (FOMC)

The branch of the Federal Reserve responsible for overseeing open market operations and setting monetary policy.

Open Market Operations

The buying and selling of government securities by the Federal Reserve to influence the money supply.

Deposit Insurance System

A system designed to protect depositors by insuring deposits in member banks, which was a weakness before the establishment of the Fed.

Required Reserves Ratio

The percentage of deposits that banks must hold as reserves and not loan out.

Chairman of the Federal Reserve

The head of the Federal Reserve System, appointed by the President of the United States, responsible for leading monetary policy.

Federal Reserve District Banks

The twelve regional banks that operate to implement federal monetary policy and serve banking needs.

Member Banks

Commercial banks that hold stock in one of the twelve Federal Reserve Banks and are part of the Federal Reserve System.

Monetary Committees

Groups within the Federal Reserve System that assist in making decisions regarding monetary policy.

Collateralized Securities

Securities that are backed by collateral to reduce risk for lenders.

Securities and Exchange Commission (SEC)

The federal agency responsible for enforcing securities laws and regulating the securities industry.

Primary Market

A financial market where new securities are created and sold to investors for the first time.

Underwriting Agreement

A contract in which an investment banker agrees to sell securities of an issuing corporation to investors.

Intial Public Offering (IPO)

The process by which a private company goes public by selling its shares to investors.

Syndicate

A group of investment banking firms that come together to jointly underwrite and distribute a security issue.

Market Stabilization

Efforts by underwriters to maintain the price of a security offering in the secondary market.

Intrinsic Value

The actual value of a security based on fundamental analysis, often compared to its current market price.

Due Diligence

The process of thoroughly researching and analyzing a corporation before making investment decisions.

Arbitrage Opportunities

Situations where investors can make riskless profits by buying and selling securities in different markets.

Fractional Reserve System

A banking system in which banks hold only a fraction of deposits in reserve and lend out the majority.