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The Federal Reserve and the Money Supply definitions

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  • Federal Reserve
    Central banking authority in the U.S. responsible for managing the nation's money supply and implementing monetary policy.
  • Monetary Policy
    Strategy involving tools to influence the amount of money circulating in the economy, primarily to achieve economic stability.
  • Discount Policy
    Method involving the setting of a specific interest rate for short-term loans to banks, impacting their borrowing behavior.
  • Discount Rate
    Interest percentage charged by the central bank on loans to commercial banks, affecting the cost of borrowing for banks.
  • Reserve Requirement
    Mandated proportion of deposits that banks must keep on hand, limiting the funds available for lending.
  • Reserve Ratio
    Fraction of customer deposits that banks are legally required to hold as reserves rather than loan out.
  • Open Market Operations
    Frequent buying and selling of government securities to adjust the volume of money in circulation.
  • U.S. Treasury Securities
    Government-issued financial instruments, such as bonds or bills, used in central bank transactions to influence liquidity.
  • Federal Open Market Committee
    Decision-making group within the central bank responsible for executing open market operations.
  • Money Supply
    Total amount of currency and checkable deposits available to the public for spending and transactions.
  • Excess Reserves
    Bank funds exceeding required reserves, available for lending to customers or other banks.
  • Required Reserves
    Minimum cash or deposit amount banks must hold, as dictated by central bank regulations.
  • Money Multiplier
    Process by which an initial deposit leads to a greater final increase in the total money supply through repeated lending.
  • Checkable Deposits
    Bank account balances that can be accessed on demand, forming a key component of the liquid money supply.