Federal Reserve System and Monetary Policy

These flashcards cover the key concepts and terms related to the Federal Reserve System and its monetary policy tools.

Federal Reserve System

The decentralized central bank of the United States, which has both public and private aspects.

Discount Rate

The interest rate charged by the Federal Reserve when lending to financial institutions.

Open Market Operations

The buying and selling of government bonds by the Fed to target the Federal Funds Rate.

Contractionary Monetary Policy

A policy that reduces the money supply by selling bonds and raising interest rates.

Expansionary Monetary Policy

A policy that increases the money supply by buying bonds and lowering interest rates.

Required Reserves

The percentage of customer deposits that banks must hold in reserve and cannot lend out.

Excess Reserves

Funds that banks hold beyond the required reserves, which can be loaned out or held at the Fed.

Reserve Requirement

The regulation that requires financial institutions to keep a certain percentage of deposits in reserve.

Federal Funds Rate (FFR)

The interest rate at which banks lend reserves to other banks overnight.

Federal Open Market Committee (FOMC)

A branch of the Federal Reserve responsible for overseeing open market operations and making monetary policy decisions.