The Federal Reserve System Objective:  Analyze the Federal Reserve System and how it influences the economy
How the Federal Reserve is set up <ul><li>The Fed is made up of about 6,000 banks across the U.S. </li></ul><ul><li>The Fe...
How the Federal Reserve is set up <ul><li>The Fed is divided into 12 districts across the U.S.  </li></ul><ul><li>Each dis...
What does the Fed do? <ul><li>The Fed makes sure that member banks do business according to certain rules </li></ul><ul><l...
What if the bank fails? <ul><li>Each bank that is a member of the Federal Reserve System must also be a member of the Fede...
Controlling the Money Supply <ul><li>The other job of the Fed is to control the money supply in the U.S. </li></ul><ul><li...
Reserve Requirement <ul><li>Is the amount of money the Fed tells banks they must keep in reserve and not use </li></ul><ul...
Discount Rate  <ul><li>This is the amount of interest the Fed charges to loan money to banks </li></ul><ul><li>The higher ...
Tight or Easy money <ul><li>When the Fed wants to encourage people to spend more it increases the money supply, this is ca...
Review <ul><li>How many people sit on the board of governors? </li></ul><ul><li>Ans. 7 </li></ul><ul><li>How many district...
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15 The Federal Reserve System

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15 The Federal Reserve System

  1. 1. The Federal Reserve System Objective: Analyze the Federal Reserve System and how it influences the economy
  2. 2. How the Federal Reserve is set up <ul><li>The Fed is made up of about 6,000 banks across the U.S. </li></ul><ul><li>The Fed is run by seven individuals called the board of governors </li></ul><ul><li>Each member is appointed by the President </li></ul>The board as of 2008 Ben S. Bernanke Chairman Donald L. Kohn Vice Chairman Kevin M. Warsh Elizabeth A. Duke Daniel K. Tarullo
  3. 3. How the Federal Reserve is set up <ul><li>The Fed is divided into 12 districts across the U.S. </li></ul><ul><li>Each district has 1 Federal Reserve Bank </li></ul><ul><li>The main office of the Fed is in Washington D.C. </li></ul>
  4. 4. What does the Fed do? <ul><li>The Fed makes sure that member banks do business according to certain rules </li></ul><ul><li>Clearing checks is one service of the Fed </li></ul><ul><li>The Fed also lends money to member banks </li></ul>
  5. 5. What if the bank fails? <ul><li>Each bank that is a member of the Federal Reserve System must also be a member of the Federal Deposit Insurance Corporation (FDIC) </li></ul><ul><li>The Fed and FDIC will work together to make sure your money is protected </li></ul>
  6. 6. Controlling the Money Supply <ul><li>The other job of the Fed is to control the money supply in the U.S. </li></ul><ul><li>The fed uses two main tools for this </li></ul><ul><li>Reserve Requirement </li></ul><ul><li>Discount Rate </li></ul>
  7. 7. Reserve Requirement <ul><li>Is the amount of money the Fed tells banks they must keep in reserve and not use </li></ul><ul><li>It can be as much as 22 percent of the money people have put in the bank </li></ul><ul><li>The higher the number the less money banks have to loan </li></ul>
  8. 8. Discount Rate <ul><li>This is the amount of interest the Fed charges to loan money to banks </li></ul><ul><li>The higher the rate the less money banks want to borrow </li></ul>
  9. 9. Tight or Easy money <ul><li>When the Fed wants to encourage people to spend more it increases the money supply, this is called easy money </li></ul><ul><li>When the Fed wants to slow down the economy it reduces the money supply, this is called tight money </li></ul>
  10. 10. Review <ul><li>How many people sit on the board of governors? </li></ul><ul><li>Ans. 7 </li></ul><ul><li>How many districts is the Fed divided into? </li></ul><ul><li>Ans. 12 </li></ul><ul><li>What is the Discount Rate? </li></ul><ul><li>Ans. This is the amount of interest the Fed charges to loan money to banks </li></ul><ul><li>What is the Reserve Requirement? </li></ul><ul><li>Ans. Is the amount of money the Fed tells banks they must keep in reserve </li></ul>

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