Monetary Policy and the Federal Reserve System
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Vocabulary-style flashcards covering the functions, structures, and tools of the Federal Reserve System and monetary policy.
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33 Terms
Three Major Monetary Policy Instruments
Reserve requirements, discount rates, and open market operations.
Money Multiplier
The reciprocal of the fractional reserve requirement ratio.
Fiduciary Monetary System
A monetary system in which currency cannot be redeemed for gold or silver.
Expansionary Monetary Policy
Economic policy involving actions such as lowering the fractional reserve requirement ratio to increase economic activity.
Contractionary Monetary Policy
Economic policy involving actions such as raising the interest on reserve balances (IORB) rate.
Interest on Reserve Balances (IORB)
The principal policy tool used by the Fed after the structural changes of the 2008 financial crisis.
Three Demand Components of Money
Transaction demand, precautionary demand, and speculative demand.
Monetary Policy
Changes in money supply and changes in interest rates.
District A Bank
The Federal Reserve Bank of Boston.
District B Bank
The Federal Reserve Bank of New York.
District C Bank
The Federal Reserve Bank of Philadelphia.
District D Bank
The Federal Reserve Bank of Cleveland.
District E Bank
The Federal Reserve Bank of Richmond.
District F Bank
The Federal Reserve Bank of Atlanta.
District G Bank
The Federal Reserve Bank of Chicago.
District H Bank
The Federal Reserve Bank of St. Louis.
District I Bank
The Federal Reserve Bank of Minneapolis.
District J Bank
The Federal Reserve Bank of Kansas City.
District K Bank
The Federal Reserve Bank of Dallas.
District L Bank
The Federal Reserve Bank of San Francisco.
Open Market Purchase
When the Federal Reserve buys treasury bonds, causing the money supply to expand and interest rates to fall.
Three Functions of Money
Medium of exchange, unit of account, and store of value.
FRED
The data collection activities housed at the Federal Reserve Bank of St. Louis.
Woodrow Wilson
The U.S. President who signed the Federal Reserve Act into law in 1913/14.
Richard Nixon
The U.S. President who suspended the gold standard in 1971.
M1
The narrow, most liquid definition of money.
M2
The definition of money that includes coins, currency, demand deposits, savings accounts, and CDs.
Jerome Powell
The current Chair of the Federal Reserve System.
Philip Jefferson
The current Vice Chair of the Federal Reserve System.
Board of Governors
A group consisting of seven members within the Federal Reserve System.
Federal Open Market Committee (FOMC)
A committee consisting of 12 members (the 7 members of the Board of Governors and 5 regional bank presidents).
Velocity of Money
The rate at which money circulates in the economy, calculated using the formula MV=PQ.
Recessionary Gap
A situation requiring expansionary monetary policy, occurring when current output is lower than the full-employment output (e.g., current output is $5,500 and full-employment output is $6,000).