4.3B Managing Money and Credit: Central Banks and the Federal Reserve

These flashcards cover key concepts related to the functions and structure of central banks, specifically focusing on the Federal Reserve and its role in managing monetary policy.

Central Bank

A government institution that issues currency, oversees and regulates the banking system, controls the monetary base, and implements monetary policy.

Federal Reserve System

The central bank of the United States, created in 1913, responsible for conducting monetary policy and maintaining financial stability.

Panic of 1907

A financial crisis that led to widespread bank runs and contributed to the establishment of the Federal Reserve to prevent future crises.

Bank Run

A situation where a large number of depositors withdraw their funds from a bank simultaneously due to fear of insolvency.

Lender of Last Resort

A function of central banks to provide emergency funds to financial institutions during times of liquidity crisis.

Monetary Policy

The actions taken by a central bank to control the money supply and influence the economy's overall activity.

Open Market Operations

The buying and selling of government securities by the central bank to control the money supply and affect interest rates.

Federal Open Market Committee (FOMC)

A committee within the Federal Reserve that makes key decisions about interest rates and the growth of the U.S. money supply.

Currency in Circulation

The physical money (bills and coins) that is in the hands of the public.

Quantitative Easing

A non-traditional monetary policy tool used by the Federal Reserve involving the purchase of financial assets to inject liquidity into the economy.