1. Kelly Munoz & Callie Gaskin

2. Fiat money (paper currency and coins, make up only a small part of America’s money supply. A much greater part involves a great demand deposits, such as checking accounts, and “near money.” Half of all transactions today do not involve currency at all Instead, they are completed through a transfer of funds initiated by the use of a check or a debit card But these can be easily converted to cash or transferred to a checking account MONEY

3. The amount of money in a nation’s money supply is crucial to the health of its economy If there is not enough money in circulation, the economy cannot grow On the other hand, too much money in circulation can also cause serious problems.. If we all have too much money, and loans are too easy to obtain, the money itself loses value and inflation results

4. Federal Reserve policy is the most important determinant of the money supply The Federal Reserve affects the money supply by affecting its most important component, bank deposits

5. The Federal Reserve requires depository institutions (commercial banks and other financial institutions) to hold as reserves a fraction of specified deposit liabilities Depository institutions hold these reserves as cash in their vaults or Automatic Teller Machines (ATMs) and as deposits at Federal Reserve banks

6. Federal Reserve controls reserves by lending money to depository institutions and changing the Federal Reserve discount rate on these loans and by open-market operations The Federal Reserve uses open-market operations to either increase or decrease reserves The seller of the treasury security deposits the check in a bank, increasing the seller’s deposit The bank, in turn, deposits the Federal Reserve check at its district Federal Reserve bank, thus increasing its reserves

7. If the Federal Reserve increases reserves, a single bank can make loans up to the amount of its excess reserves, creating an equal amount of deposits As each bank lends and creates a deposit, it loses reserves to other banks, which use them to increase their loans and thus create new deposits, until all excess reserves are used up

8. The Federal Reserve is an independent central bank It is independent since its decisions do not have to be ratified by the President or Congress The Federal Reserve System was created by Congress in 1913

9. "to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes."

10. "banks - Google Search." Google. N.p., n.d. Web. 9 May 2013.. "first federal reserve - Google Search." Google. N.p., n.d. Web. 9 May 2013.. WORKS CITED