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Federal Reserve
 

Federal Reserve

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    Federal Reserve Federal Reserve Presentation Transcript

    • The Federal Reserve and the Money Supply
      • 10-1 Social Studies
      • Ohio Academic Content Standards:
        • 10 th Grade
        • Economics
          • Understanding functions of the Federal Reserve
    • Learning Targets
      • I can explain the difference between inflation and recession.
      • I can predict what the Fed will do to reverse inflation or recession.
      • I can evaluate the changes made in the discount rate.
      • I can analyze why the Fed was created and the role it plays in regulating the money supply.
    • Government and the Economy
      • The Great Depression-what did it do?!
        • More government involvement
        • Relief and reform agencies
        • More jobs=more money=more spending!
      • Taxes
        • Income, federal, state, local, excise
        • 16 th amendment=income tax!
        • Taxes bring revenue or “income” to the gov!
      • Federal Budget
        • We are in a deficit!
        • surplus=bring in more revenue than we spend
    • Regulations
      • A rule or law that controls how an industry can function
      • Protection from industry abuses
      • Usually in the form of laws
      • For example: Federal Communications Commission..FCC
        • Regulated foreign and interstate communications by radio, television, cable, ect.
    • The Money Supply....aka The Federal Reserve!!!!
      • Money: Anything accepted as final payment for goods and services.
      • Money Supply: Currency in the hands of the public, plus checking-type accounts.
      • The supply of money in the economy is important for price stability and economic growth.
      • Too much money in the economy can cause INFLATION
      • Too little money in the economy can lead to falling prices and falling production....DEPRESSION OR RECESSION
    • The Fed
      • The Federal Reserve controls the money supply through monetary policy. Monetary policy works through encouraging or discouraging banks from making loans.
      • Monetary policy:
        • Changes in the money supply, intended to maintain stable prices, full employment, and economic growth
        • If the Fed is fighting unemployment and declining GDP, it wants to increase the money supply
        • If the Fed is fighting inflation, it wants to decrease the money supply
    • Changes in the Discount Rate
      • The discount rate is the interest rate that the Fed charges on loans to banks
      • When the Fed lowers the discount rate, banks are encouraged to make more loans and the money supply increases
      • When the Fed raises the discount rate, banks are discouraged from making loans and the money supply decreases
    • Changes in the Reserve Requirement
      • The reserve requirement is the minimum percentage of deposits that banks must keep on reserve to back up checking-type accounts
      • When the Fed lowers the reserve requirement, banks have more money to lend and the money supply increases
      • When the Fed raises the reserve requirement banks have less money to lend and the money supply decreases