119 Chapter 5 Federal Reserve System Review Your Knowledge On a separate sheet of paper or in a word processing document, match the following terms with the defi nition that fi ts best. A. decentralization B. discount rate C. monetary system D. National Banking Act E. bank run 1. Amount of money a bank must keep on hand and not invest or loan out. 2. Allowed the government to charter private banks. 3. Central authority shares power with regional and local authorities. 4. Depositors come in great numbers at the same time to get their money out of the bank. 5. Time period when all bank functions were handled by state banks. 6. Affects the interest rate that the bank charges customers to borrow money. 7. Interest rate that banks charge their best commercial customers. 8. The President of the Federal Reserve Bank in New York is always a member. 9. Mechanism a nation uses to provide and manage money for itself. 10. Alexander Hamilton believed this would make the country stronger. On a separate sheet of paper or in a word processing document, answer each of the following questions. 11. Identify the three US politicians who were involved in establishing the fi rst two central banks in the US. fi 12. In what way was the Second Bank of the US different than the First Bank? 13. What feature of the Federal Reserve System ensures that it is a decentralized banking system? 14. How does the Fed report to the US Congress? 15. What are the four primary functions of the Fed? F. prime rate G. central bank H. reserve requirement I. Federal Open Market Committee (FOMC) J. era of free banking
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