Economics Chapter 9 Part 2

Department of the Treasury

responsible for creating coinage and paper $ in America (Bureau of the Mint/Engraving and Printing)

Federal Reserve System

privately owned agency that controls the money supply in America

Board of Governors

leaders of the Federal Reserve (appointed by the President and confirmed by the Senate)

FOMC

deals with the buying and selling of government properties and finances

Federal Reserve Banks

12 total (1 for each district); controls policies, interest rates, and money supply of banks in each district

Open Market Operations

selling government investment properties to the American people

Selling

reduces money supply

Buying

increases the money supply

Fractional Reserve Banking

Federal Reserve determines the reserve ratio for the bank (the % of deposits they must not loan out) - raised to reduce money in circulation

Discount Rates

private banks can borrow money from the Federal Reserve; interest is paid back in each loan -raised to reduce money in circulation

Easy Money

more funds in circulation through ready approval of loans to increase money in circulation

Recession

a period during which the economy recedes or declines

Milton Friedman

conservative economist during Reagan’s Presidency

Monetarism

the variation in the money supply is the main source of economic fluctuations

Banks

most common; offer various kinds of savings and checking accounts

Credit Unions

members can join voluntarily and have voting privileges for making decisions and creating policies in the organizations

Finance Companies

make loans directly to consumers

Insurance Companies

receive a premium paid by the insured in the event of loss or death

Pension Funds

receive funds from a company’s employees and employers may contribute on behalf of the employees

Collateral

property that a lender will hold until loans are repaid; secured loans are backed by collateral

Wage Garnishment

court order demanding that an employer take a specified amount out of an employee’s wages each paycheck to pay the creditor

Down Payment

a large initial cash payment

Equity

partial ownership of an item

Chapter 7 Bankruptcy

most of this person’s debts are forgiven

Monetarism

What theory does Milton Friedman support