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The Federal Reserve and the Money Supply definitions

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  • Federal Reserve
    Central banking authority in the US responsible for managing monetary policy and regulating the money supply.
  • Monetary Policy
    Strategy used by central banks to influence economic activity by controlling money supply and interest rates.
  • Discount Rate
    Interest charged by the central bank for short-term loans to commercial banks, affecting loan volume and money supply.
  • Reserve Requirement
    Minimum fraction of deposits banks must hold as reserves, limiting their lending capacity and impacting money supply.
  • Open Market Operations
    Buying or selling government securities by the central bank to adjust the amount of money in circulation.
  • US Treasury Securities
    Government-issued financial instruments, such as bonds and bills, used in monetary policy to influence liquidity.
  • Money Supply
    Total amount of currency and checkable deposits available to the public for spending and investment.
  • Federal Open Market Committee
    Decision-making body within the central bank responsible for conducting open market operations.
  • Required Reserves
    Funds banks must legally keep on hand, restricting the portion available for loans and affecting money creation.
  • Excess Reserves
    Bank funds exceeding required reserves, available for lending and contributing to money supply expansion.
  • Money Multiplier
    Process by which initial deposits lead to greater increases in the money supply through repeated lending.
  • Liquidity
    Ease with which assets can be converted to cash, influenced by central bank actions and money supply changes.
  • Interest Rates
    Cost of borrowing money, shaped by central bank policies and affecting economic activity and loan demand.
  • Market Equilibrium
    State where supply and demand for money are balanced, influenced by monetary policy and money supply adjustments.
  • Checkable Deposits
    Bank account balances accessible for spending, forming a key component of the money supply.