ECONOMICS
MR. MILEWSKI
SPRING 2011
Chapter#15 The Fed & Monetary Policy
Know the following terms:
monetary policy
reserve requirement
excess reserves
fractional reserve system
Federal Advisory Council
Federal Open Market Committee
Comptroller of the Currency
discount rate
Board of Governors
margin requirements
Know the following concepts:
The Fed is owned by who?
Which types of banks are members of the Fed?
What are the responsibilities of the Fed?
What services does the Fed provide?
When a bank keeps $12 from a $100 deposit as legal reserves, it is using what system?
What does a bank use to make loans?
What actions by the Fed would promote an easy money policy?
What actions by the Fed would promote a tight money policy?
What are the tools of monetary policy?
What is the quantity theory of money? What does it say about the effect of excessive increases in the monetary supply?
What is the dilemma faced by the Fed when considering monetary policy?
Why does the Fed monetizes debt?
Why does the Fed remain largely independent from politics?
The Fed has defined different categories of money. What is M1? What is M2?
In the short run, what does an increase in the money supply result in?
T or F: The Federal Reserve System is supervised by a Board of Governors whose members are appointed by the
president for life.
T or F: If the Fed increases the interest rate, it will increase the supply of money.
APPLYING SKILLS
Using Graphs: Study the graph and answer the questions below.
1. What is shown along the x-axis?
2. Describe the general trend of the prime rate from 1975 to 1981.