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Front

What is financial intermediation?

Back

Financial intermediation is the process by which financial institutions, such as banks, transfer funds from savers to borrowers, facilitating the flow of money in the economy.

Front

What is the dual mandate of the Federal Reserve?

Back

The dual mandate of the Federal Reserve is to promote maximum employment and stable prices, which includes maintaining low and predictable levels of inflation.

Front

What is the money multiplier?

Back

The money multiplier is a factor that quantifies the maximum amount of money that can be created in the banking system for each unit of reserves.

Front

What is contractionary monetary policy?

Back

Contractionary monetary policy is a type of policy used by central banks to reduce the money supply and increase interest rates to combat inflation.

Front

What are bank reserves?

Back

Bank reserves are the cash that banks hold in their vaults or at the central bank, which is not lent out to borrowers.

Front

What is the role of the Federal Reserve?

Back

The Federal Reserve serves as the central bank of the United States, regulating the banking system, conducting monetary policy, and providing financial services.

Front

What is sustainable employment?

Back

Sustainable employment refers to the level of employment that can be maintained over the long term without leading to inflation or economic instability.

Front

What is inflation?

Back

Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.

Front

What is the significance of low inflation?

Back

Low inflation is significant because it helps maintain the purchasing power of money, encourages savings, and promotes economic stability.

Front

What is the relationship between savers and borrowers in financial intermediation?

Back

In financial intermediation, savers provide funds to financial institutions, which then lend those funds to borrowers, facilitating investment and consumption.