Federal Reserve System, Banks and the supply of money

The amount of money in the U.S economy is determined by what?

The interaction between the public, commercial banks, and the Federal Reserve System

What is the Federal Reserve System?

The central bank of the United States. It is responsible for overseeing the banking system, and regulating the supply of money

When was the Federal Reserve System created?

1913

How many banks does the Federal Reserve system consist of?

12

What is a nickname for the Federal Reserve System?

The Fed

Who runs the Fed?

A board of governors

How many governors are apart of the Fed?

7

Who appoints people to run the Fed?

The President, and confirmed by the Senate

How long are terms for governors?

Fourteen years

Why are terms applied to govenors?

To insure that the actions of the Fed are protected from political pressures

How many banks are responsible for overseeing commercial banks?

12

How does the Fed help banks obtain funds?

They act as a sort of bankers bank making loans to banks when they wish to borrow funds

What does the Federal reserve act as?

A lender of last resort to maintain the stability of the overall banking system

What is the quantity of money in the economy collectively called?

The Money Supply

Who holds responsibility over the Money Supply?

The Federal Open Market Committee (FOMC)

Who makes up the FOMC?

The seven governors of the Fed plus five regional bank presidents

True or False, places on the FOMC rotate among the banks?

True

Who is always a member of the Fed?

The president of the New York Fed

How often does the FOMC meet?

Every six weeks

Where does the FOMC meet?

Washington DC

What does the FOMC asses when they meet?

The state of the economy, and to determine if any monetary policy are necessary

If the FOMC decides that money supply needs to be adjusted, how does the Fed achieve the goal?

Through the adjustment of administered rates

How might the Fed stimulate a recessionary economy?

Lowering discount rates and interest rate on reserves resulting in banks being less incentivized to hold money in reserves

In a recessionary economy, money increases in the hands of who?

The public

How would the Fed reduce inflationary pressures?

Raising administered rates to encourage banks to hold more money in their reserve

What is the name for the Fed reducing inflationary pressures

Ample reserve policy

Central banks that use limited reserve policy will use what kind of market operations?

Open Market operations, to adjust the money supply

If the central bank wishes to increase money supply in open market operations what will it do?

Purchase government bonds from other banks, or the public increasing the amount of currency and deposits in the hands of the public

What must banks keep in order to pay its depositors?

Reserves

By holding a fraction of deposits as reserves what are banks able to do?

Create money

True or false, while banks create more money, it creates more wealth

It has not created any more wealth. Because of fractional reserve the bank makes the economy more liquid, but it doesn’t increase the total amount of wealth in the economy

With 180 in liabilities, the twenty percent reserve ratio suggests that a bank should hold reserves equal to what?

36$