Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

American History > The Fed. > Flashcards

The Fed. Flashcards

1
Q

What was Alan Greenspan meaning when he said that Caution seems warranted?

A
  1. He was warning of economy collapse.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Name six historical events that showed the power of Alan Greenspan.

A

Saved the world a couple of times, cost George Bush I his reelection, He made our wealth to greatly increase by making the markets soar for a time, He sent tremors through the Global Economy when he used the Phrase “ irrational exuberance” to describe an unstable stock market, he also caused a recession, and crashed the market in 2001.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How powerful was Alan Greenspan?

A

He could make or break fortunes and economies with a word.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What was “the briefcase index”?

A

A humorous attempt at predicting his actions based upon the thickness of his briefcase.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What impact could the actions of Alan Greenspan as Federal Reserve Chairman make on the world?

A

He could kill entire national economies with a word.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the term “the Fed” short for?

A

The Federal Reserve Board

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What was the Fed created for?

A

To be the central bank of the USA

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When was the Fed created?

A

1913

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the Fed’s supposed duty?

A

To preserve and protect a flexible but stable economy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the two powers of the Fed?

A

It has power over the nation’s currency and conducts the nation’s monetary policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is “the money supply”?

A

The amount of money in the system is known as the money supply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Besides controlling the money supply, what else does the Fed do?

A

It is to protect a flexible, stable economy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q
  1. What did the Full Employment and Balanced Growth Act instruct the Fed to do? When was this enacted? (4 pts)
A
  1. Seek stable prices, maximize sustainable growth, maximize employment.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What axiom does Economics traditionally hold to?

A

Growth is good, too much growth is bad.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When an economy grows too fact, what does it inevitably lead to?

A

Inflation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is inflation?

A

the rising prices as the result of too much money chasing too few goods.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Why is too much job growth not good?

A

It leads to inflation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Why is a certain amount of unemployment necessary and even good?

A

It limits rising labor costs

and dampens consumer demand, helping to keep prices in check.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Before the economic boom of the mid-1990’s what did economic orthodoxy say?

A

That unemployment could not fall below six percent without provoking dangerous inflation levels.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What two key questions did the Fed have to wrestle with in setting its policies?

A

What is sustainable growth, what is maximum employment?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What impacts do Fed policies have upon America?

A

Cost of loans, profits, the stock market, who is president.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What does the Federal Reserve System consist of?

A

The board of governors, The twelve federal reserve banks.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How many governors of the Fed are there and how are they made?

A

Seven. They are nominated by the president, confirmed by the Senate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How long is the term of the governors?

A

Fourteen years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Why are the terms of governors so long?
So that changing politics don’t affect them as much.
26
How are the chairman and vice-chairman of the Fed nominated?
They are nominated by the president, confirmed by the Senate.
27
Name the 12 Federal Reserve Banks. Note: You will find the name of one of these banks on every dollar bill in your wallet.
Atlanta, Boston, Chicago, Cleveland, Dallas, Minneapolis, Kansas City, New York, Philadelphia, Richmond, St. Louis, and San Francisco.
28
What are the four responsibilities of the twelve reserve banks?
Oversee the banking industry, regulate currency in production, clear the majority of paper checks, facilitate wire transfers.
29
What does the Board of Governors of the Fed do?
Controls discount rate.
30
What is a bond?
A bond is a note or obligation requiring the borrower—usually a government or corporation—to pay the lender—an individual or institutional investor—the amount of the loan (“face value”) at the end of a fixed period of time.
31
What chief way that governments and businesses raise cash to stay in business?
Bonds
32
Where do government and corporate bonds trade at?
An open bond market.
33
What direction do bond prices move?
In the opposite direction of interest rates
34
What are T-Bills
Securities with maturities ranging from thirteen weeks to one year.
35
What are all three Treasury securities collectively called?
Bonds.
36
What advantage do Treasury securities have over corporate bonds?
Less risk
37
What advantage do corporate bonds have over government bonds?
Greater returns.
38
What are the riskiest bonds called? What are their two characteristics?
Junk Bonds. Lowest credit quality, Highest potential returns.
39
What is a deficit?
The amount more that the government spends than it makes.
40
What makes up the national debt?
Accumulated deficits.
41
What do large deficits tend to lead to?
Higher interest rates. The government competes with its constituents for capital.
42
Why do some economists believe that some deficit spending is necessary?
To stimulate the economy.
43
When do some economists believe that deficit spending is necessary?
In a crisis such as a war.
44
What is surplus?
When the government takes in more than it spends
45
What three things can be done with a government surplus?
It can be saved, used to reduce debt, or returned to taxpayers through tax cuts.
46
What is a central bank?
A national bank that operates to control and stabilize the currency and credit conditions in a country’s economy, usually through the control of interest rates.
47
What is the Consumer Price Index (CPI)?
A measure of change over time in the price that consumers pay.
48
What is the broadest measure of the country's rate of inflation?
The CPI.
49
What is the Producer Price Index (PPI)?
It measures the price producers pay to produce the things they produce.
50
What is the Discount Rate?
The interest rate that the twelve Federal Reserve banks charge to private commercial banks, savings and loan associations, savings banks, and credit unions to borrow reserves from the Fed.
51
How is the Discount Rate controlled?
This rate is controlled by the board of governors.
52
What is the key means in recent years that the Fed uses to set interest rates?
The discount rate.
53
What is the Federal Funds Rate?
The average interest rate at which federal funds actually trade in a day.
54
How does the Fed influence the Federal Funds Rate?
The Fed influences interest rates by easing or tightening through either the sale or the purchase of U.S. Treasury bonds.
55
Who decides to buy or sell U.S. Treasury Bonds?
this rate is controlled by the Federal Reserve’s Federal Open Market Committee, or FOMC.
56
What is the rate that banks charge other banks called?
Short-term interest.
57
What is the Fed’s main weapon against both inflation and a shrinking economy?
The funds rate.
58
What does the Federal Funds rate affect?
Overall credit conditions in the country.
59
How does the Fed ease or make credit more available?
The Fed buys U.S. Treasury Bonds.
60
What does buying Treasury bonds do?
This causes the Fed funds rate to go down.
61
What makes it easier for businesses and consumers to borrow money?
The drop in the Fed funds rate.
62
What does buying Treasury bonds encourage?
Encourages the economy to grow.
63
How does the Fed tighten credit?
The Fed sells U.S. treasury bonds.
64
How does the Fed withdraw money from the banking system?
Selling bonds decreases the money banks have to lend.
65
What makes borrowing money more difficult for the consumer or businesses?
The lack of funds banks have to lend.
66
What is the Fed’s main tool for fighting inflation?
Tightening credit.
67
How many members are there in the Federal Open Market Committee (FOMC)?
12.
68
How often does the FOMC meet?
Eight times per year.
69
What does the FOMC do in its meetings?
Assesses the state of the economy and sets guidelines for the purchase and sales of bonds by the Fed.
70
Who are the voting members of the FOMC?
The seven Fed governors, the president of the New York Federal Reserve Bank, and four of the other eleven Federal Reserve Bank presidents, who serve one-year voting terms on a rotating basis.
71
What is Fiscal Policy? Who controls it?
The government’s plan for spending and taxing.
72
What is the Gross Domestic Product (GDP)?
The total amount of all goods and services that a nation produces.
73
What does measuring GDP determine?
Measuring the GDP determines whether the economy is growing or contracting and how fast it is moving in either direction.
74
What is inflation?
Simply put, too many dollars chasing too few goods, usually the result of demand outstripping supply.
75
Why are price increases necessary?
To sustain profits and wage growth.
76
What is Monetary Policy? Who controls it?
The central bank’s actions to influence interest rates and the supply of money available in the economy.
77
What is Productivity?
The statistical measure of the average hourly output of workers.
78
Why is productivity good?
The more productivity, the less products cost, the smaller inflation is.
79
How can one have sustained economic expansion with little inflation?
Gains in productivity.
80
What is a Recession?
A nationwide decline in overall business activity characterized by a drop in buying, selling, and production, and a rise in unemployment.
81
When is the economy considered to be in Recession?
Many economists consider a nation’s economy in a recession if the output of goods and services falls for six consecutive months, or two quarters.
82
When is the economy considered to be in a Depression?
When a recession grows worse and lasts longer.
83
What is a Stock?
Certificates representing partial ownership in a corporation and a claim on the firm’s earnings and assets.
84
What is a dividend?
A portion of the corporate earnings distributed to shareholders.
85
What makes a stock’s price rise or fall?
Company earnings.
86
When did Alan Greenspan take over the Fed?
1987.
87
What was remarkable about the 10-year period starting in 1991?
A Goldilocks economy formed: low inflation, employment growth, more money being made, etc.
88
Look it up: Who is “Goldilocks”? What is a “Goldilocks economy”?
She was a children’s story character who was a picky eater/sleeper. A Goldilocks economy would be one in which everything was “just right”
89
Name four features in the world that contributed to the Goldilocks economy
New technologies, relative peace in the world with the end of the Cold War, the growth of global markets, and freer trade were all credited for powering this economic engine.
90
Look it up: What does the word “inscrutable” mean?
Mysterious.
91
Who was the Fed chairman before Alan Greenspan?
Paul Adolph Volker.
92
Who appointed Alan Greenspan?
Ronald Reagan.
93
What had Paul Volcker been responsible for, and why did he take that action?
Volcker had been responsible for setting interest rates extremely high in an attempt to battle the excessive inflation of the late 1970s.
94
How far did inflation fall under Paul Volcker?
%12.2
95
How long was Paul Volcker’s term of Fed Chairman?
1979 - 1987.
96
Why couldn’t Carter get the economy moving?
His anti-inflation policy.
97
Why was Carter beaten by Reagan in the Presidential election?
Carter’s inability to get the economy moving.
98
Why did the Reagan team choose Alan Greenspan as Fed chairman?
They hoped that he wouldn’t similarly cripple Reagan’s presidency.
99
What was Alan Greenspan’s class standing at the University of New York (NYU)?
Summa cum laude.
100
Who was Ayn Rand?
A writer who set foreword the philosophy of Objectivism.
101
Name two characteristics of Ayn Rand.
Anti-socialist, anti-religious.
102
What is Objectivism?
A moral and economic philosophy based on individualism and self-interest.
103
What was Rand’s philosophy?
A philosophy requiring little government interference and celebration of the individual over the society.

American History (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions