ECONOMICS Chapter 16 - The Federal Reserve System Key

1. Interest is the price paid for the use of borrowed money. 2. The Federal Reserve controls the nations money supply. 3. Monetary policy is influencing the economy by controlling the nations money supply. 4. Fiscal policy is the use of government spending & revenue collection to influence the economy. 5. Fiscal policy is implemented by the federal government. 6. An easy money policy is monetary policy that increases the money supply. 7. A tight money policy is monetary policy that reduces the money supply. 8. 3 tools: a. Reserve requirements b. The discount rate c. Open market operations 9. The reserve requirement is the formula used to compute the amount of reserves an institution must have. 10. The discount rate is the interest rate that the Fed charges on loans to banks. 11. Open market operations refer to the buying and selling of government securities by the Fed.