economics: section 9.5

department of the treasury

responsible for creating coinage and paper money in America (Bur. of the Mint / Engraving and Printing)

federal reserve system

privately owned agency that controls the money supply in America

board of governors 

leaders of the Federal Reserve (appointed by the President and confirmed by the Senate)

federal open market (FOMC) 

deals with the buying and selling of government properties and finances

federal reserve banks

controls policies, interest rates, and money supply of banks in each district

12

how many total federal reserve banks are there? (1 for each district)

open market operations 

selling government investment properties to the American people

reduces

fill in the blank

with open market operations, selling ______ money supply

increases

fill in the blank

with open market operations, buying _______ the money supply

fractional reserve banking

Federal Reserve determines the reserve ratio for the bank (the % of deposits they must not loan out — raised to reduce money in circulation)

discount rates 

private banks can borrow money from the Federal Reserve; interest is paid back in each loan — raised to reduce money in circulation

“easy money”

more funds in circulation through ready approval of loans to increase money in circulation

recession

a period during which the economy recedes or declines

Milton Friedman 

ervative economist during Reagan’s Presidency; supporter of the theory of monetarism

monetarism

the variation in the money supply is the main source of economic fluctuations

banks

most common; offer various kinds of savings and checking accounts

credit unions

members can join voluntarily and have voting privileges for making decisions and creating policies in the organizations

finance companies 

make loans directly to consumers

insurance companies

receive a premium paid by the insured in the event of loss or death

pension funds

receive funds from a company’s employees and employers may contribute on behalf of the employee

collateral 

property that a lender will hold until loans are repaid

secured

fill in the blank

_______ loans are backed by collateral

wage garnishment

court order demanding that an employer take a specified amount out of an employee’s wages each paycheck to pay the creditor

down payment 

a large initial cash payment

equity

partial ownership of an item

1. secured

2. cosign

3. authorized

fill in the blank

credit history and credit bureaus:

1. Apply for a _______ credit card 

2. Get someone to _____ on a loan 

3. Become an _________ user on a credit card