Banks and the Federal Reserve System a.k.a The Fed SOL CE: 10c 11d The student will demonstrate knowledge of the US economy by explaining how the Federal Reserve System works with private financial institutions to regulate the money supply.
The Fed slows the economy by restricting/decreasing the money supply.
The Fed stimulates/grows the economy by increasing the money supply.
The Fed slows the economy by taking money out of circulation: 1. Increasing the reserve requirement (banks keep more $) 2. Increasing the discount rate (banks pay more to borrow $) 3. Selling gov’t. securities (less money put into circulation)
Slows the economy by: increasing reserve, increasing discount, selling bonds.
The FED stimulates/grows the economy by putting money into circulation: 1. Lowering the reserve requirement (banks lend more $) 2. Lowering the discount rate (Banks pay less to borrow $) 3. Purchasing gov’t. securities (more money put into circulation)