Federal Reserve Note

AAA

DEFINITION of 'Federal Reserve Note'

The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand. This term is often confused with Federal Reserve Bank Notes, which were issued and redeemable only by each individual member bank, but phased out in the mid-1930s.

INVESTOPEDIA EXPLAINS 'Federal Reserve Note'

Prior to 1971, any Federal Reserve Note issued was theoretically backed by an equivalent amount of gold held by the U.S. Treasury. However, under President Nixon, the gold standard was officially abandoned creating a fiat currency. In other words, Federal Reserve Notes were no longer backed by hard assets. Rather, Federal Reserve Notes were now backed solely by the government's declaration that such paper money was legal tender in the United States.

RELATED TERMS
  1. Fiat Money

    Currency that a government has declared to be legal tender, but ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Digital Currency Exchanger - DCE

    A market maker who exchanges legal tender for electronic currency, ...
  4. Term Fed Funds

    Funds that banks borrow from the Federal Reserve for longer than ...
  5. Federal Advisory Council

    A group of 12 banking executives - one from each Federal Reserve ...
  6. Key Rate

    The specific interest rate that determines bank lending rates ...
Related Articles
  1. What Causes A Currency Crisis?
    Forex Fundamentals

    What Causes A Currency Crisis?

  2. The Gold Standard Revisited
    Budgeting

    The Gold Standard Revisited

  3. What Is Money?
    Economics

    What Is Money?

  4. Successful Ways That Governments Reduce ...
    Economics

    Successful Ways That Governments Reduce ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center