Federal Reserve Bank and Open Market Operations Flashcard

Front

What is the main role of the Federal Reserve?

Back

To set monetary policy

Front

Which body of the Federal Reserve makes monetary policy decisions?

Back

Federal Open Market Committee (FOMC)

Front

What is the federal funds rate?

Back

The interest rate banks charge each other for overnight loans

Front

How does the federal funds rate affect other interest rates?

Back

It can influence other shorter-term interest rates

Front

What are open market operations used for?

Back

Implementing monetary policy

Front

What is the purpose of expansionary monetary policy?

Back

To decrease interest rates and encourage borrowing

Front

What happens when the Federal Reserve purchases government securities?

Back

Reserves in the banking system increase

Front

What is the purpose of contractionary monetary policy?

Back

To increase interest rates and discourage borrowing

Front

What happens when the Federal Reserve sells government securities?

Back

Reserves in the banking system decrease

Front

What is the purpose of expansionary monetary policy in a post-recession economy?

Back

To encourage economic recovery and growth