Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
28 Cards in this Set
- Front
- Back
The central bank of the United States that sets policies designed to control the money supply.
|
The Federal Reserve
|
|
When the Federal Reserve lowers the discount rate, what do banks do?
|
Banks loan more money
|
|
Why does the Federal Reserve require banks to keep a percentage of their funds as reserves?
|
To supply in case of withdrawals
|
|
When the Federal Reserve sells government securities on the open market, what effect does this action have on the nation's money supply and aggregate demand?
|
The Money Supply Decreases
Aggregate Demand Decreases |
|
What is a monetary policy that might be used to reduce inflation?
|
Open Market Sales
(selling bonds/securities) |
|
In which situation might the Federal Reserve buy government securities and lower its discount rate?
|
in a recession
|
|
The Federal Reserve conducts its business directly with
|
The government and banks
|
|
The Federal Reserve comes to the conclusion that more money must be pumped into the economy in an effort to stimulate growth. What monetary policy of the open market would result in increasing the money supply?
|
buy securities (bonds)
|
|
The Federal Reserve System is concerned that the US economy might be on the verge of a deflationary period much like the one suffered by the Japanese. Which actions could the fed take together that will both increase the money supply?
|
Open market purchases (buy bonds)
Decrease the reserve requirement (reserve ratio) |
|
What is the Organization of the Federal Reserve? (4 parts---top to bottom)
|
Board of GOVERNORS
Federal Open Market Committee Regional Federal Reserve Banks Private Member Banks |
|
What organization is primarily responsible for the control of the money supply?
|
The Federal Reserve System
|
|
How is monetary policy different from fiscal policy?
|
Monetary policy involves the money supply, while fiscal policy involves government taxing and spending decisions.
|
|
After much debate in Congress, the House and Senate finally pass a bill calling for a 5% tax decrease and a cut in federal funding to education institutions. The president then signs the bill. What is this an example of?
|
The government's fiscal policy
|
|
If the Federal Government is attempting to expand the economy, a fiscal policy BEST serving this purpose would be
|
decreasing taxes
|
|
Who is responsible for the control of fiscal policy?
|
Congress and the president
|
|
Congress approves a budget that allocates how much money will be spent in defense, education, social programs, etc. Their plan also calls for an increase in taxes to help pay for all of these expenses. This plan defines the government's ______________________.
|
Fiscal Policy
|
|
The federal government is concerned that investment spending has declined and the unemployment rate is on the rise. To offset the economic slowdown, what could the government do?
|
Use fiscal policies to increase spending on new projects and grants
|
|
What effect does a "tight money" policy have on the reserve requirement (reserve ratio) and the economy's money supply?
|
Raises the reserve requirement (ratio), thereby decreasing the money supply
|
|
Increasing the reserve requirement (ratio) is likely to have what effect on the money supply?
|
Decrease the money supply
|
|
During a period of high unemployment, what monetary policy might the Federal Reserve use and why?
|
lower the discount rate, which would increase the money supply, encourage consumer spending, and increase aggregate demand
|
|
One of the tasks of the Federal Reserve System is making loans to ________________________.
|
Commercial banks
|
|
The Federal Reserve can best be described as this
|
A bank for banks
|
|
What are the three tools of monetary policy that can be adopted by the Federal Reserve?
|
Raise or lower the Reserve Requirement (Ratio)
Raise or lower the discount rate Open market sales (selling bonds/securities) Open market purchases (buying bonds/securities) |
|
When the Federal Reserve buys government securities on the open market, what effect does this action have on the nation's money supply and aggregate demand?
|
Money supply increases
Aggregate Demand Increases |
|
Fiscal policy is concerned with what two things?
|
Government spending and taxation
|
|
The Federal Government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. What fiscal policy might be enacted to reduce inflation?
|
Increasing taxation
|
|
Increased consumption is a side-effect of what type of money policy by the Federal Reserve?
|
An "easy money" policy
|
|
The unemployment rate is rising and the GDP is falling---so something needs to be done to stimulate the economy. The federal government wants to attempt to encourage spending by consumers and business. What fiscal policy would best serve these purposes?
|
Decreasing taxes
|