BackIntroduction to the Federal Reserve definitions
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1/15BackSkip to main contentBackFederal Reserve
Central banking system of the United States, established in 1913 to address financial instability and oversee monetary policy. Central Bank
Institution responsible for managing a nation's currency, money supply, and banking system stability. Board of Governors
Seven-member leadership group, appointed by the President and confirmed by the Senate, serving as the Fed's highest authority. Chairperson
Leader of the Board of Governors, serving a four-year term and guiding the direction of U.S. monetary policy. Federal Reserve Banks
Twelve regional institutions, each with its own president and board, overseeing banking operations in their districts. Federal Open Market Committee
Policy-making body composed of Board members and regional presidents, meeting regularly to set monetary policy. Monetary Policy
Actions taken to control the money supply and influence economic conditions, mainly through open market operations. Bank Run
Situation where many depositors withdraw funds simultaneously, often due to fears of bank insolvency. Lender of Last Resort
Role of providing emergency funds to banks facing liquidity crises to prevent systemic collapse. Discount Loan
Short-term credit extended by the Fed to banks, typically at the lowest available interest rate. Discount Rate
Interest charged by the Fed on loans to commercial banks, influencing overall lending rates. Federal Funds Rate
Interest rate for overnight loans between banks, slightly higher than the discount rate. Open Market Operations
Buying and selling of government securities by the Fed to adjust the money supply. Reserve Requirement
Minimum fraction of deposits banks must hold as reserves, set by the Fed to influence lending. Bank Failure
Event where a bank cannot meet withdrawal demands, often leading to insolvency and loss of public confidence.
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