ECONOMICS CHAPTER 16

FEDERAL RESERVE

SECTION 1 – THE FEDERAL RESERVE SYSTEM

I. Organization of the Fed (est. 1913 )

A. ______of ______has ______

B. Appointed by the ______

C. Approved by ______

D. Serve _____ year ______with a new member being

selected every _____ years.

E. Chairman appointed by ______(______

current chairman)

F. Sets the ______and ______for the “FED”

II. Federal Advisory Council

  1. Has ____ members, one from each of the Federal ______.
  2. Meets ____ times a year
  3. Provides feed back to the FED on ______and ______.

III. Federal Open Market Committee

  1. ____ members
  2. __ of the ___ members are from the Board of ______.
  3. The other ____ members represent the ______.
  4. ______Federal Reserve Bank’s representative is always the ______. Why?
  5. Conducts ______policy
  6. Responsibility of ______and ______government ______on a daily basis to keep the economy ____
  7. Meet formally ____ times a year.

IV. Number of Federal Reserve Banks across the Nation

  1. ____ Federal Reserve Banks
  2. ____ Branches
  3. ______Texas is home to District Bank ____ which serves our area
  4. ______Texas is a branch of Dist. ____ San Antonio, Tx. And El Paso Tx. Are the other two for this region?

V. Who owns the “FED”?

A. ______Banks

B. Own ______in the “FED” system.

SECTION 2 – FEDERAL RESERVE FUNCTIONS.

I. Federal Reserve Functions

A. Serving the Government

1. The Federal Reserve serves as the ______for the ______.

2. Federal Reserve serves as a ______for the

______Dept.

3. The Federal Reserve removes ______from ______and replaces it with new currency.

B. Serving Banks

1. The Federal Reserve clears checks for member banks.

This is the largest job of the Fed.

2. The Federal Reserve supervises member banks and

their lending practice. They also monitor banks

holding companies and must approve bank mergers.

C. Regulating the Banking System

1. The Federal Reserve monitors the ______of member banks on a _____ basis. The Banks must meet their ______at the end of each day.

2. The Federal Reserve has bank ______that make

visits to banks to check on their lending practices and

the overall ______of the bank.

D. Regulating the Money Supply

1. The most important job is regulating the _____

______by using monetary policy.

SECTION 3 – MONETARY POLICY

I.Money Multiplier Formula: initial deposit ______by the reserve requirement _____ increase in money supply.

II. Tools of the Federal Reserve

  1. Open Market Operation- the number ______or most used tool of the “FED” Used daily by the ______.
  2. If the Federal Reserve chooses to ______the

money supply the “FED” will ______

government securities on the open market.

2. If the Federal Reserve chooses to ______the money supply the “FED” will ______government securities on the open market though the FOMC.

B.Discount Rate- is the ______rate the “FED” charges

member banks to ______money. The ______most used tool of the “FED”

1. Reducing the discount rate ______banks to

_____ more money and will increase the money

multiplier.

2. Increasing the discount rate will make banks ____

willing to borrow money from the “FED”. This will

cause a ______in the money multiplier.

C. The Reserve Requirement is the ______tool but the

least used tool.It is the tool of ______resort.

1. Reducing the reserve requirement ______the money multiplier.

  1. Increasing the reserve requirement ______the money multiplier.

SECTION 3 Monetary Policy

I. Easy Tight

Money Money

  1. What will happen to the

money supply?

______

  1. What are the positive

side effects?

______

  1. What are the negative side

effects?

______

  1. Who gets hurt?

______

  1. What will the “FED” do to

the reserve requirements?

______

  1. What will the “FED” do to

the discount rate?

______

  1. What will the “FED” do

in the open market?

______

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