Review Notes - The Federal Reserve System

- what is the organization of the FED?

- board of governors

- regional banks

- open market committee

- what is the purpose of the FED?

- banker for commercial banks - lender of last resort

- banker for the federal government

- controls the U.S. money supply

- regulates money markets

- what are the tools of the FED in controlling the money supply?

- legal reserve requirements

- what are legal reserve requirements?

- how do they affect the money supply?

- open market operations

- when the FED buys bonds then what happens?

- when the FED sells bonds then what happens?

- the discount rate

- what is it?

- how do changes in the discount rate affect the money supply?

- moral suasion/regulatory controls

- which is the most powerful tool of the FED?

- which is the most used tool of the FED?

- who else, besides the FED, affects the money supply in the U.S. and how?