Term
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Definition
-Board of Governors
-12 District Banks
-Federal Open Market Committee (FOMC) |
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Term
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Definition
-7 members appointed by the president and confirmed by the US Senate for 14 year terms
-The long terms are intended to protect the board from political pressure |
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Term
| Jobs of the Board of Governors |
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Definition
-to analyze financial and economic conditions
- Administer credit protection laws
- Supervise and regulate 12 District Banks
- Collect and publishes data |
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Term
| Most powerful figure in the FED |
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Definition
Chair of the Board of Governors
-also chair of the FOMC
-appt. by president to 4 year term. |
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Term
| How many FED regions are there? |
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Definition
| 12 regional Federal Reserve Banks |
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Term
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Definition
| -Insures all economic interests from different regions are represented. |
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Term
| Jobs of 12 District Banks |
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Definition
-Bankers' Bank
-Governments' Bank |
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Term
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Definition
-Process payments
-Hold deposits
-Lend during a crisis
-Regulate and supervise
-Collect data |
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Term
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Definition
-Operate payment systems
-Manage treasury accounts/debts
-Issue new currency and destroy old |
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Term
| Federal Open Market Committee (FOMC) |
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Definition
-Board of Governors plus 5 Reserve Bank presidents
-Sets Federal Funds Rate and Open Market Operations
-Controls Discount Rate |
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Term
| Can FOMC control nominal as well as real interest rates? Explain. |
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Definition
-the rate the FOMC controls is a nominal interest rate. Since inflation doesn't change quickly, however, the FOMC in effect controls the REAL interest rate (nominal int. rate - expected inflation).
-The real interest rate plays a central role in economic decisions, (^ it is, borrowing more expensive.) |
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Term
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Definition
-compilation of anecdotal info about current business activity, collected by staffs of the Reserve Banks.
-Published about 2 weeks before the meeting.
-The only FOMC document that is released to public before the meeting. |
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Term
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Definition
-contains the Board staff's economic forecast for the next few years.
*Treated as secret documents not released to public until 5 years after the meeting. |
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Term
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Definition
-Discussion of financial markets and current policy options are distributed electronically during the week preceding the meeting.
*Treated as secret FOMC document not released to public until 5 years after the meeting. |
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Term
| Criteria for central banks |
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Definition
-Political Independence
-Decision-making by committee
-Accountability
-Transparency
-Policy Framework |
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Term
| FED and Political Independence |
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Definition
-Monetary policy makers must be free of political influence
3 criteria-1.Budgetary independence 2.Irreversible decisions 3.Long terms
-FED meets all 3 criteria--controls own budget, generates enough revenue that 95% returned to US Treasury. |
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Term
| FED and decision-making by committee |
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Definition
-makes decisions by committee, since FOMC is a committee.
-Group decisions > Individual decisions.
-No one person has too much control over monetary policy. |
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Term
| FED and Accountability & Transparency |
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Definition
Are policy makers accountable to the public?
-explicit goals = accountability
Progress towards goals?
-Make reports public frequently |
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Term
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Definition
-Can't achieve all goals at once? Tradeoffs?
-Monetary and fiscal policy must mesh
-politicians prefer borrowing to taxing.
-Spend today at the expense of future prosperity. |
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