Politics and Economics Vocabulary 3 Mr. Thacker

Chapter 16 Unit 4: Taxation

Identify and/or Explain

1. Money creation

2. Multiplier effect

3. Required reserve ratio

4. Money multiplier formula

5. Excess reserves

6. Prime rate

7. Open market operations

8. Federal Open Market Committee

9. Bond Sales

Questions

1. Using an example, explain how banks create money. (10)

2. Explain how the Federal Reserve adjust banking reserves through the RRR. (6)