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17 Cards in this Set

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What date was the Federal Reserve Created?

Dec. 23, 1913

Why was the Federal Reserve Started?

Federal Reserve Act, financial panics

3 Key objectives of the Federal Reserve

Maximum Employment, Stable Prices, Moderate long-term interest rates

What are the 4 functions of a central bank?

Manages a state's currency, money supply, and interest rates, prints national currency

What does a Central Bank oversee?

Commercial bank system

Powers of the Federal Reserve

Supervises and Regulates Banks, Maintains Stability of financial system, Provides financial services to depository institutions

Federal Reserve Board of Governors

Main governing body of the Federal Reserve System. Oversees Federal Reserve Banks and helps Implement monetary policy of the US Governors appointed by the President and confirmed by the Senate

FOMC

Committee within the FRS that oversees the nation's open market operations. Makes key decisions about interest rates and growth of money supply

Example of FOMC

Feds buying and selling of US Treasury Securities

Creation of money

Central Bank loans to commercial bank, they keep fraction of loan as a deposit and extend the loan to other commercial banks. Those banks also keep fraction of loan as deposit and re-loan the rest.

Money Multiplier

One of the various closely related ratios of commercial bank money to central bank money under a fractional-reserve banking system. Measures the amount of commercial bank money that can be created by a given unit of central bank money.

Keynes Monetary Policy

View that in the short run, especially during recessions, economic out put is influenced heavily by aggregate demand. Also holds view that productive capacity of the economy is influenced by a host of factors and sometimes behaves erratically, affecting production, employment, and inflation.

Monetarism

School of thought that emphasizes the role of governments in controlling the amount of money in circulation. They believe that variation in the money supply has major influences on national output in the short run and price level over longer periods.

Elasticity of Demand Curves

Measure that shows the responsiveness of the quantity of a demanded good or service to a change in its price. Gives the percentage change in quantity demanded in response to a 1% change in price. Almost always negative.

Nominal interest Rate

conceptually simplest form of interest rate. simply the stated interest rate of a given bond or loan. Referred to as the coupon rate for fixed income investments.

Real interest rate

States the real rate that the lender or investor receives after inflation is factored in; that is, the interest rate that exceeds the inflation rate.

Monetary Policy Rules

Taylor Rule: Stipulates how much the central bank should change the nominal interest rate in response to inflation, output, or other economic conditions.