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macroeconomics > federal reserve system > Flashcards

federal reserve system Flashcards

1
Q

fiscal is

A

treasury and congress

-applies to tex poliyc and unemployemnt

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2
Q

monetary is

A

fed

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3
Q

difference between monetary and fiscal

A

institution diffference. they used to be carried out by the gov. now they are (by law) independent

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4
Q

how do we measure inflation

A

RGDP

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5
Q

what is the optimal rate of inflation

A

should be (+)

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6
Q

when was the change of the feds mandate

A
  1. can chage it again. they consider switch to single mandate
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7
Q

pre independence

A

euro. coins, barter, locally issued commodity backed fiat

-no central power
-double coincadence of wants

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8
Q

was the first bank of the united states like Fed

A

not like fed today because no distinction between monetary and fiscal issue

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9
Q

what was used to finance civil war

A

green backs

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10
Q

what was debate about bonds

A

should we issue bonds

north=yes
south=no we leave it to states

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11
Q

why did US want to create fed

A

US financial stuff was saved by JP morgan so US decided they did not want indiviudal people to have so much influence, so created fed to issue money

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12
Q

what do fed actions depend on

A

its mandate

-like in WWII mandate/focus was financing/winning war

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13
Q

why is there less incentive to bank run today

A

because it is FDIC insured

FDIC = prevent bank runs (prevent fire in 1st place)

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14
Q

four primary tools of fed

A

1) reserve requirements
2) interest on reserves
3)open market operations
4) discount rate

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15
Q

reserve requirement

A

% deposit banks have to hold to support said deposits

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16
Q

what is reserve requirement % today

A

it is zero because banks use to be on tight leash and in 2020 got rid of leash become some slack on leash already after 2010

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17
Q

what is interest on reserves

A

whne they hold reserve money with fed. main tool fed uses today to change interest rates. pay banks 5% on reserve holdings

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18
Q

what are open market operations

A

purchase/sale of financial assets on financial markets

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19
Q

what are main open market operations

A

bond and rates. also buy ortage back secuity and commencial bonds (business debt)

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20
Q

what is discount rate

A

rate if ou take out loan from bank that you pay

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21
Q

is interest on reserve lower than discount rate

A

yes because fed changes it more

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22
Q

what are the three institutions of the federal reserve system

A

1) federal open market committee
2)federal advisory council
3)member banks

23
Q

why are terms non renewable on board of governors

A

because want to make sure these peopple choose free of political influence
-good way to achieve independence

24
Q

do chairman in board of governors have more power than the others

A

no, most power comes from representative function

25
Q

what are the five functions of the federal reserve board

A

1) vote on coduct of OMO
2)sets reserve requirements/IOR
3)review/determines disc rate
4)regulation
5)reviews each FRB budget

26
Q

the chair of the board is also the chair of the

A

FOMC

27
Q

what is the most important function of the chair

A

TALK

28
Q

who was blamed for great depression

A

fed was blamed. Fed did not intervene enough (fed leader died around then)

29
Q

why is great depression/world war II pushing on a string

A

pushigng is a way less effective than pulling on a string. Increase AD is differicult.

easy to make things slow down, harder to make go

30
Q

paul volker disinflation

A

the new approach to monetary policy involved high interest rates (tight money) to slow the economy and fight inflation.

31
Q

2008 financial crisis tactics with ben bernake

A

came up with polciies to combat it

-qualitative easing
-0% interest rate
(at the time these were unconventional)

32
Q

labor market with janet yellen

A

-labor market imprived with her each month
-first woment o serve as secretary of treasury and chair

33
Q

jerome powell coronavirus recession

A

“wait to see how history views gerome powell”

34
Q

prior to the banking act of 1935, whcih established the FOMC, who played a larger role in setting policy than it does today

A

FRBNY

35
Q

6 functions of federal reserve banks

A

1)vote on OMO on rotating basis
2)recommend discount rate, make discount window loans
3)offer clearing/settlement services
4)collect data on local business conditions
5)conduct policy relevant research
6)withdraw damaged (vault) cash, issue new (vault cash)

36
Q

what is beige book

A

economic analysis

37
Q

Fed now new settlement system

A

to have real time gorss output
-payment immediatkey at low cost
-wires but cheaper

38
Q

why does NY host the federal reserve trading dek

A

because it has lots of banks

39
Q

what does FOMC committee do

A

-consisrs if 12 rotating members
-meets 8 times a year
-issues directives to the NY fed trading desk

40
Q

FOMC pre

A

members preapre by consuting two primary sources of info (the tealbooks and beige books)

41
Q

FOMC post

A

the fed communicates its assessment and strategy to the public

42
Q

what does each FOMC member receive before each meeting

A

two confidential tealbooks in addition to the publicly available beiege book

43
Q

Historically greenbooks were

A

analysis of the local and internaitonal economy

44
Q

historically bluebooks were

A

monetary policy strategy/alternatives

45
Q

historically redbooks were

A

current economci comment by district

46
Q

is fed transparent

A

today, in recent years the Fed has made a series of efforts to increase transparency surrounding the FOMC policy making

47
Q

why 2% Fed interest rate goal

A

no sicience behind it. having an explicit interest rate is all about transparecy and anchoring peoples expectations

48
Q

do most countries have single or dual mandate

A

single

49
Q

feds dual mandate

A

choose between max employment vs stable prices
-first person to make this choice was paul volcker (disinflation)

50
Q

economcist believe that so long as inflation expectations are well anchored, ……

A

monetary policy faces a tradeoff between achieving low inflation and low unemploment

51
Q

hawk prioritize

A

low inflation

52
Q

doves prioritive

A

low unemployment

53
Q

what would happen if the fed were independent

A

it could be used to print money and finance expenditures

54
Q

who owns the fed

A

not a private institution
-joint effort of private sector (like wells fargo) and government

macroeconomics (26 decks)

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