Chapter 15 - The Federal Reserve System and Open Market Operations

These flashcards cover essential vocabulary related to the Federal Reserve System, monetary policy, and the money supply.

Federal Reserve System

The central bank of the United States responsible for regulating the money supply and serving the U.S. government's banking needs.

Aggregate Demand

The total demand for goods and services within an economy at a given overall price level and in a given time period.

Reserve Ratio

The fraction of deposits that a bank is required to hold as reserves and not lend out.

Monetary Base (MB)

The total amount of a currency that is in circulation or held in reserves by a central bank.

Money Multiplier (MM)

The ratio of deposits created by banks to the reserves they hold; a measure of the impact that reserve requirements have on the money supply.

Liquidity Trap

A situation in which monetary policy becomes ineffective because people hoard cash instead of lending it or investing it.

Open Market Operations

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

Checkable Deposits

Deposits in a bank account that can be withdrawn by checks or debit cards.

Quantitative Easing

A non-traditional monetary policy tool used by the Fed to stimulate the economy by buying long-term securities.

Total Reserves

The sum of cash held by a bank and its deposits with the Federal Reserve.

Currency

Physical money in the form of banknotes and coins.

Savings Deposits

Deposits held in savings accounts that typically earn interest.