The Federal Reserve System

The Federal Reserve System is...

• The world central bank

• the U.S. central bank

• a place stocks and bonds are sold

• All of the above

The Federal Reserve was first created because our nation

• didn't trust banks

• wanted complete control over all banks

• experienced several banking panics and crisis

• none of the above

What services does the Fed provide to the banks?

• provides cash and lends money to banks

• processes payments and electronic money transfers

• check clearing

• all of the above

Who decides when and which of three monetary tools should be in an effort to manage the economy?

• The President

• Congress

• The Fed Chief

• The Federal Open Market Committee

What is the discount rate?

• the average discount people receive at the banks

• the interest rate that the Fed charges banks to borrow money from them

• the interest rate charged to all bank customers

• none of the above

When the Federal Reserve wants to encourage the economy to grow, what does it do with money supply?

• increase the money supply

• decrease the money supply

• sell all of its asset

• none of the above

Match the following

• reserve requirement

• _____ is how much money each bank is required by the Fed to keep on hand

• money supply

• _____ is the price that borrowers pay to borrow money

• prime rate

• _____ is the interest rate the banks charge their best customers

• interest rate

• _____ is the amount of money circulating in the economy

True or False: Individuals and small businesses are allowed to have bank accounts or do banking with the Fed.

• True

• False

True or False: The Fed is able to influence the economy by increasing or decreasing the money supply using three key monetary tools.

• True

• False

True or False: Ms. D is the best teacher in the world.

• True

• False