Chapter 15

Question 1

member banks

Answer 1

commercial banks that are members of, and hold stock in, the Fed

Question 2

Board of Governors (3)

Answer 2

• sets general policies for the Federal Reserve and member banks to follow
• regulates certain operations of state-chartered member banks
• conducts some aspects of monetary policy

Question 3

Federal Reserve District Banks

Answer 3

accept the deposits of and make loans to banks and thrift institutions

Question 4

Federal Open Market Committee

Answer 4

makes decisions about the growth of the money supply and the level of interest rates

Question 5

Federal Advisory Council

Answer 5

provides advice to the Federal Reserve on matters concerning the overall health of the economy

Question 6

Consumer Advisory Council

Answer 6

makes consumer credit laws; consists of educators, consumer legal specialists, and reps from consumer and financial industry groups

Question 7

Thrift Institutions Advisory Council

Answer 7

advise on matters pertaining to the thrift industry; consists savings and loan association reps, savings banks, and credit unions

Question 8

Responsibilities of the Fed (3)

Answer 8

• Regulate holding companies
• Supervise foreign banks in the U.S.
• Approve bank mergers

Question 9

monetary policy

Answer 9

the expansion or contraction of the money supply in order to influence the cost and the availability of credit

Question 10

fractional reserve system

Answer 10

requires banks and other depository institutions to keep a fraction of their deposits in the form of legal reserves

Question 11

excess reserves

Answer 11

legal reserves in excess of the reserve requirement

Question 12

easy money policy

Answer 12

the Fed allows the money supply to grow and interest rates to fall, which normally stimulates the economy

Question 13

tight money policy

Answer 13

the Fed restricts the growth of the money supply, which drives interest rates up