American Gov Questions
4th assignment
Sawyer Burkhalter
10/20
What is the federal reserve ? Name three responsibilities of the Fed.
It is the central bank of the United States; incorporates 12 Federal Reserve branch banks and all
national banks and state-chartered commercial banks and some trust companies.
1. They supervise banks banking regulation
2. Check clearing
3. Enforce consumer legislation.
10/21
Explain the way the Fed is organized.
Board of governors-5 people serve on it . The board sets Fed policy regarding the discount rate
and reserve requirements (among other key economic decisions).
Federal open market commitee.-7 member group. committee within the Federal Reserve
System, is charged under United States law with overseeing the nation's open market operations .It is
the Federal Reserve committee that makes key decisions about interest rates and the growth of the
United States money supply
Federal advisory council- A group of 12 banking executives - one from each Federal Reserve
District - that advises the Federal Reserve Board regarding the state of the banking industry and money
supply.
10/24
What is monetary policy ?Explain the two types of monetary policy.
The actions of a central bank, currency board or other regulatory committee that determine the
size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is
maintained through actions such as increasing the interest rate, or changing the amount of money
banks need to keep in the vault (bank reserves).
Tight money policy-Reserve requirement goes up. Selling of gov bonds. Discount rate goes up.
Used to curb inflation
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American Gov Questions
4th assignment
Sawyer Burkhalter
Loose money policy-Discount rate goes down. Reserve requirement goes down. Buying back of
gov bonds. Used to curb recession.
10/25
Explain the 3 monetary policy tools.
a. Discount Rate- interest rate of loans from the fed
b. Open market operations-buying and selling of gov bonds
c. Reserve requirement-how much cash banks must keep on hand.
10/26
Explain how the reserve requirement will affect the money supply ,interests rates aggregate demand
and supply and the overall health of the economy..discuss tight and loose money policy.
With a lower reserve requirement banks can lend more .Interest rates will go down .Money
supply will go up .Aggregate demand will go up . Loose money policy-Discount rate goes down. Reserve
requirement goes down. Buying back of gov bonds. Used to curb recession. Tight money policy-Reserve
requirement goes up. Selling of gov bonds. Discount rate goes up. Used to curb inflations.
10/27
Is monetary policy a good tool to influence our economy ?Why? Explain the pos and negative
consequences of monetary policy.
Yes ,because it promotes growth and stability. It can however get out of control and put us into
a recession.
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