Vocabulary 06: The Federal Reserve

Central Bank

Manages a nation's currency, supervises banks, and sets monetary policy.

Private Reserve Banks

Twelve regional Federal Reserve banks that oversee local banks, manage money supply, and process government payments.

FOMC

The Federal Open Market Committee - Public-private partnership that sets monetary policy and interest rates.

Board of Governors

Seven presidentially appointed officials who oversee the Federal Reserve System..

Payment Processing

Secure transfer of funds between payer and payee, involving authorization and settlement.

Manage Currency

Regulating money supply to maintain economic stability.

Monetary Policy

Federal Reserve tools to influence the economy, such as interest rates and reserve requirements.

Lender of Last Resort

Federal Reserve loans to banks in financial distress

Fractional Reserve Banking

System where banks keep a portion of deposits and loan out the rest to stimulate growth.

Reserve Requirement

The minimum amount of cash banks must hold at the Federal Reserve, set by the Board of Governors.

Discount Rate

Interest rate the Fed charges banks for loans; it influences borrowing and spending