Econ Ch 15 Lesson 2

Front 1

Explain fractional reserve banking

Back 1

When a system that requires banks and other financial institutions to keep a percentage of their deposits

Front 2

How does the Fed expand the money supply?

Back 2

The Fed buys securities from a securities dealer then gives him the money. But along with that, the Fed leaves the securities dealer with the money and the securities he got for them. Leaving him with more than he had. This is option 1. Or the Fed could manufacture more money.

Front 3

What are the effects of tight money policies?

Back 3

When the economy is expanding too quickly, the Fed tries to slow the economy with it.

Harder to borrow money and increased interest rates

Front 4

Loose Money Policy

Back 4

A strategy designed to encourage borrowing and business expansion

Front 5

Expansionary policy

Back 5

A loose money policy

Front 6

Tight Money Policy

Back 6

A policy that makes credit harder to obtain

Front 7

Contractionary Policy

Back 7

Another word for tight money policy

Front 8

Fractional Reserve Banking

Back 8

A system that requires banks and other financial institutions

Front 9

Discount rate

Back 9

The rate of interest the Fed charges on loans to member banks

Front 10

Government securities

Back 10

Short and long-term bonds the government sells to pay for its programs

Front 11

Open market operations

Back 11

The buying and selling of government securities by the Fed