Federal Reserve Bank Functions

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Questions and Answers

What is the primary function of money according to the text?

To facilitate economic transactions and measure the value of goods and services

What is one of the key characteristics of money, according to most economists?

It is a store of value, a medium of exchange, and a standard of value

How does lawyer-economist Louis Kelso view money?

As a social tool for measuring values used for the exchange of property rights

What is the impact of contracts, private property, and credit arrangements on the economy, according to Louis Kelso?

They affect the economic system and the nature of money Signup and view all the answers

What is the relationship between money and the economy, according to the text?

Money is a yardstick for measuring economic input, output, and the relative values of goods and services Signup and view all the answers

What is currency, according to the text?

A commonly recognized determination of value, often regulated by government Signup and view all the answers

What is the primary function of money in terms of property rights?

To secure the fundamental human right to acquire private property Signup and view all the answers

What is the relationship between money and human potential, according to the text?

Money can be used to achieve economic liberation and universal prosperity Signup and view all the answers

What is the primary purpose of creating money through commercial banks and a central banking system?

To allow for the creation or cancellation of money as needed by the economy Signup and view all the answers

According to the House Banking and Currency Committee, what was the intended main way for the Federal Reserve System to create bank reserves?

Issuing promissory notes Signup and view all the answers

What is a consequence of the Federal Reserve purchasing almost no eligible paper from 1933 to 1964?

Commercial banks had limited loanable funds Signup and view all the answers

What is the role of a monetary system in the economy, according to Louis O. Kelso and Patricia Hetter?

To create claims against others or the economy as a whole Signup and view all the answers

What is a potential consequence of having too little money in the economy?

Deflation Signup and view all the answers

What was the original intention of the Federal Reserve System when it was set up in 1914?

To let the money supply grow with the needs of the economy Signup and view all the answers

What can happen when the Federal Reserve System creates or cancels money as needed by the economy?

There is never too little or too much money Signup and view all the answers

What is the relationship between the monetary system and the visible sector of the economy, according to Louis O. Kelso and Patricia Hetter?

The monetary system is a part only of the invisible sector Signup and view all the answers

What was the primary objective of monetizing 'eligible' short-term commercial paper?

To provide liquidity to sound banks in periods of stress Signup and view all the answers

What was the primary function of the Federal Reserve bank in the original design of the central banking system?

To purchase 'eligible' commercial paper from member banks Signup and view all the answers

What is the term for the process by which a commercial bank sells its qualified loan paper to the central bank?

Rediscounting Signup and view all the answers

What is the primary benefit of an 'elastic' asset-backed reserve currency?

It facilitates commerce and stabilizes the economy Signup and view all the answers

What is the ultimate goal of creating money to purchase assets that pay for themselves out of their own future profits?

To promote capital formation and acquisition by every person Signup and view all the answers

What is the primary characteristic of a central banking system as originally designed?

It is a system that provides an automatic guide to the provision of an adequate and stable money supply Signup and view all the answers

What is the primary risk of allowing the central bank to control the money creation process?

It may lead to the concentration of power in the hands of an élite Signup and view all the answers

What is the primary benefit of using the money creation powers of the central bank to finance capital formation and acquisition by every person?

It provides a stable source of income for individuals Signup and view all the answers

What is the primary function of money in terms of facilitating economic transactions?

To serve as a medium of exchange Signup and view all the answers

What does money provide, according to the text, in terms of measuring economic input and output?

A method of measuring obligations, rights, powers, and privileges Signup and view all the answers

Which of the following is a characteristic of money, according to most economists?

It is a medium of exchange Signup and view all the answers

What is the relationship between money and the economic system, according to the text?

Money is a social tool for measuring values used for the exchange of property rights Signup and view all the answers

What is the primary function of a monetary system, according to Louis O. Kelso and Patricia Hetter?

A means of accumulating claims against others or the economy Signup and view all the answers

What is the primary intention behind creating money through commercial banks and a central banking system?

To ensure that there is always enough money in the economy to meet its needs Signup and view all the answers

What is the primary function of money as a standard of value?

To provide a common unit of account for the economy Signup and view all the answers

What is the consequence of the Federal Reserve purchasing almost no eligible paper from 1933 to 1964?

Deflation and a lack of money in the economy Signup and view all the answers

What is the relationship between money and private property, according to the text?

Money is a social tool for acquiring and securing private property Signup and view all the answers

What is the primary function of money as a common measure of value?

To provide a common unit of account for the economy Signup and view all the answers

What is the relationship between the monetary system and the visible sector of the economy?

The monetary system is a part of the invisible sector of the economy and its adequacy can only be measured by its effect on the visible sector Signup and view all the answers

What is the primary objective of the Federal Reserve System when it was set up in 1914?

To ensure that there is always enough money in the economy to meet its needs Signup and view all the answers

What is the primary function of money as a store of value?

To hold value over time Signup and view all the answers

What would happen if the Federal Reserve System creates or cancels money as needed by the economy?

There would never be too little money or too much money in the economy Signup and view all the answers

What is the primary function of money in the economy, according to Louis O. Kelso and Patricia Hetter?

A medium of exchange, store of value, standard of value, and common measure of value Signup and view all the answers

What is the ultimate goal of creating money to purchase assets that pay for themselves out of their own future profits?

To ensure that there is always enough money in the economy to meet its needs Signup and view all the answers

What is the primary goal of the 'Just Third Way' system of political economy?

To empower economically every person Signup and view all the answers

How does the 'Just Third Way' system finance the future of the U.S. economy?

With a more just system of money and credit Signup and view all the answers

What is the role of the capital credit insurer in the 'Just Third Way' system?

To deem a loan a good risk Signup and view all the answers

What is the term for the process by which a commercial bank sells its qualified loan paper to the central bank?

Rediscounting Signup and view all the answers

What is the primary benefit of the 'Just Third Way' system?

It enables the 100% of humanity to work together in the shortest possible time Signup and view all the answers

How does a local commercial bank accept a loan contract from a citizen?

By issuing a promissory note Signup and view all the answers

What is the role of the twelve regional Federal Reserve banks in the 'Just Third Way' system?

To buy loan paper from commercial banks Signup and view all the answers

What is the primary mechanism by which the 'Just Third Way' system extends credit to citizens?

Through a system of no-interest credit loans Signup and view all the answers

Study Notes

Central Banking System

The system was designed to guide the banking system towards providing an adequate and stable money supply to meet the needs of industry and commerce.
Member banks could obtain credit from the nearest Federal Reserve bank by rediscounting their "eligible paper" or getting advances from the Federal Reserve bank.

Role of Commercial Banks

Commercial banks provide loans to businesses or other productive enterprises, a process called "discounting".
The commercial bank then sells the qualified loan paper to the central bank, a process known as "rediscounting".

Money Creation

The central banking system creates an "elastic", asset-backed reserve currency to stabilize the economy and facilitate commerce.
The money creation powers of the central bank can be used to spread power around by financing capital formation and acquisition by every person.

What is Money?

Money is anything that can be used to measure, and to represent, the value of something being offered to satisfy a debt, or being exchanged in the marketplace.
Money can take many forms, including financial contracts, depending on how people exchange things they own or reasonably expect to acquire.
Money is a social tool, an artifact of civilization invented to facilitate economic transactions.
Money provides a means for securing the fundamental human right to acquire private property.

Characteristics of Money

Money is a medium of exchange, a store of value, a standard of value, and a common measure of value.
Currency or current money involves a commonly recognized determination of value, often regulated, but not necessarily created, by government.

Louis Kelso's Perspective on Money

Money is a social tool for measuring values used for the exchange of property rights.
Money is not a part of the visible sector of the economy; people do not consume money.
Money provides a method of measuring obligations, rights, powers, and privileges.

The Purpose of the Central Banking System

The system was designed to benefit everyone by allowing money to be created or cancelled as needed by the economy.
The system was intended to ensure that there would never be too little money (resulting in deflation) or too much (causing inflation).

What is Money?

Money can be anything that measures and represents value, and is used to satisfy debts or exchange goods in the marketplace.
Money can take many forms, including financial contracts, and is a means to secure private property and facilitate economic transactions.

Functions of Money

A medium of exchange
A store of value
A standard of value
A common measure of value

Understanding Money

Money is a social tool, not a physical factor of production, but a yardstick for measuring economic input and output.
It provides a method of measuring obligations, rights, powers, and privileges.
It allows individuals to accumulate claims against others or the economy as a whole.

Creating Money

Money is created through commercial banks and a central banking system, such as the U.S. Federal Reserve System.
The system is designed to benefit everyone, allowing money to be created or cancelled as needed by the economy.

The Just Third Way

A proposed new system of political economy that aims to empower every person economically.
It finances the future of the economy by giving every citizen an equal right and access to the financial system.
It would provide no-interest credit to every citizen to purchase new shares in companies, with repayment coming from future profits.

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Federal Reserve Bank Functions

Questions and Answers

What is the primary function of money according to the text?

What is one of the key characteristics of money, according to most economists?

How does lawyer-economist Louis Kelso view money?

What is the impact of contracts, private property, and credit arrangements on the economy, according to Louis Kelso?

What is the relationship between money and the economy, according to the text?

What is currency, according to the text?

What is the primary function of money in terms of property rights?

What is the relationship between money and human potential, according to the text?

What is the primary purpose of creating money through commercial banks and a central banking system?

According to the House Banking and Currency Committee, what was the intended main way for the Federal Reserve System to create bank reserves?

What is a consequence of the Federal Reserve purchasing almost no eligible paper from 1933 to 1964?

What is the role of a monetary system in the economy, according to Louis O. Kelso and Patricia Hetter?

What is a potential consequence of having too little money in the economy?

What was the original intention of the Federal Reserve System when it was set up in 1914?

What can happen when the Federal Reserve System creates or cancels money as needed by the economy?

What is the relationship between the monetary system and the visible sector of the economy, according to Louis O. Kelso and Patricia Hetter?

What was the primary objective of monetizing 'eligible' short-term commercial paper?

What was the primary function of the Federal Reserve bank in the original design of the central banking system?

What is the term for the process by which a commercial bank sells its qualified loan paper to the central bank?

What is the primary benefit of an 'elastic' asset-backed reserve currency?

What is the ultimate goal of creating money to purchase assets that pay for themselves out of their own future profits?

What is the primary characteristic of a central banking system as originally designed?

What is the primary risk of allowing the central bank to control the money creation process?

What is the primary benefit of using the money creation powers of the central bank to finance capital formation and acquisition by every person?

What is the primary function of money in terms of facilitating economic transactions?

What does money provide, according to the text, in terms of measuring economic input and output?

Which of the following is a characteristic of money, according to most economists?

What is the relationship between money and the economic system, according to the text?

What is the primary function of a monetary system, according to Louis O. Kelso and Patricia Hetter?

What is the primary intention behind creating money through commercial banks and a central banking system?

What is the primary function of money as a standard of value?

What is the consequence of the Federal Reserve purchasing almost no eligible paper from 1933 to 1964?

What is the relationship between money and private property, according to the text?

What is the primary function of money as a common measure of value?

What is the relationship between the monetary system and the visible sector of the economy?

What is the primary objective of the Federal Reserve System when it was set up in 1914?

What is the primary function of money as a store of value?

What would happen if the Federal Reserve System creates or cancels money as needed by the economy?

What is the primary function of money in the economy, according to Louis O. Kelso and Patricia Hetter?

What is the ultimate goal of creating money to purchase assets that pay for themselves out of their own future profits?

What is the primary goal of the 'Just Third Way' system of political economy?

How does the 'Just Third Way' system finance the future of the U.S. economy?

What is the role of the capital credit insurer in the 'Just Third Way' system?

What is the term for the process by which a commercial bank sells its qualified loan paper to the central bank?

What is the primary benefit of the 'Just Third Way' system?

How does a local commercial bank accept a loan contract from a citizen?

What is the role of the twelve regional Federal Reserve banks in the 'Just Third Way' system?

What is the primary mechanism by which the 'Just Third Way' system extends credit to citizens?

Study Notes

Central Banking System

Role of Commercial Banks

Money Creation

What is Money?

Characteristics of Money

Louis Kelso's Perspective on Money

The Purpose of the Central Banking System

What is Money?

Functions of Money

Understanding Money

Creating Money

The Just Third Way

Studying That Suits You

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