Central Texas College Macro Economics Worksheet

(1) Define and/or explain 10 key terms related to the Federal Reserve. Key Terms: Federal, Reserve Act of 1913, Board of Governors, Discount Rate, Prime Rate, Federal Reserve District, Federal Reserve Note, The First Bank of the United States, The Second Bank of the United States, FDIC, Fractional Reserve System.

(2) Short written questions relating to the history and functions of the Federal Reserve.

1. Briefly describe how the Federal Reserve physically controls the actual supply of money.

2. Explain how raising and lowering interest rates can affect the supply of money.

3. How does the Federal government have oversight of the Federal Reserve?

4. What person was responsible for establishing the first central bank, and why is that so important for our economy today?

5. What is the web site for the Federal Reserve? Describe the home page. What links are on the homepage?

(3) Find a recent article on the actions of the Federal Reserve and write a summary of the article (1 whole paragraph). What is the web site for the Federal Reserve? Describe the home page. What links are on the homepage. Publication, date, author, short description of article. Attach copy of article to assignment.

Interest Rates

(1) Who controls the interest rate?

(2) If interest rates go up; what generally happens to the U.S. dollar?

(3) If interest rates go down; what generally happens to the U.S. dollar?

(4) What is arbitrage?

(5) What is triangular arbitrage?

Inflation

1.) Describe inflationary pressures and provide 3 examples.

2.) How do petroleum price influence inflation?

3.) What is a “good” U.S. inflationary rate?

4.) Explain how deflationary pressures happen. Give 3 examples of deflationary pressure.

5.) When did the United States last have high inflation and how did it “solve” that crisis?

6.) What can cause instant inflation?

7.) Give an example of inflation that you have noticed in the last year: