Federal Reserve and Monetary Policy

Flashcards covering key concepts related to the Federal Reserve and monetary policy.

Federal Reserve

The central bank of the United States responsible for managing the money supply and interest rates.

Monetary Policy

Actions taken by the Federal Reserve to manage the money supply and interest rates to achieve macroeconomic policy goals.

Dual Mandate

The Federal Reserve's two main objectives: High Employment and Price Stability.

Open Market Operations

Buying and selling of government securities by the Fed to influence the money supply.

Interest on Reserve Balances

The interest rate that banks earn on excess reserves held at the Federal Reserve.

Discount Rate

The interest rate charged by the Federal Reserve to banks for short-term loans.

Target Federal Funds Rate

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

Treasury Bills

Short-term government securities that mature in one year or less.

Treasury Notes

Government securities with maturities of 2 to 10 years.

Treasury Bonds

Long-term government securities with maturities of 20 to 30 years.

Inflation

The rate at which the general level of prices for goods and services is rising.

Price Stability

A monetary policy goal to maintain a low and stable inflation rate.

Employment Rate

The percentage of the labor force that is employed.

CPI Inflation

Consumer Price Index inflation, a measure of the average change over time in the prices paid by urban consumers.

Economic Growth

An increase in the production of goods and services in an economy.

Fiscal Policy

Government adjustments to its spending levels and tax rates to influence a nation's economy.

Bank Reserves

Cash that banks hold in their vaults or deposits with the central bank.

Arbitrage

The simultaneous purchase and sale of an asset to profit from a difference in the price.

Overnight Reverse Repurchase Agreement Rate

An administered rate that sets a floor on the federal funds rate.