Bellringer1. What can the government do to effect the economy? 2. Pick 1 of your answers to #1 and give a positive effect for society 3. Pick 1 of your answers to #1 and give a negative effect for society
Great “Great Depression Recession” Housing Crisis1929-1933 2007-200927% drop in GDP 5 % drop in GDP25% Unemployment 10% Unemployment36% drop in World 20% drop in World trade trade43 straight months of 18 straight months of declining spending !!!! declining spending Source Yoram Bauman, World Bank
What is a Credit Union then?• Smaller, regional, non-profit, theme based, lower rates
Does the bank have to keep all the money you deposit on hand? NO, fractional reserve system
Who sets the reserve rate?• “The Fed”• 1913
How does “the Fed” work?
Who controls “the Fed”?
What does “the Fed” do? Controls Money supply Clears Supplies Checks Money THE FED Gov’t Sets Accounting ReserveRequirements Supervise Banks
8. Why is the Chairman of the Fedsometimes thought of as the “second most powerful man in the US”? 398-399 • Cause: increases the reserve rate • Effect: • Cause: lowers reserve rate • Effect:
What if the bank goes out of business?• $250,000 per US account
What about other countries?
Book 398-407• Write a 1 page letter to Fed Chairman Ben Bernanke• Explain whether you support a expansionary or contractionary policy in 2010• Mention what your policy might do to US unemployment now at 10.2%• Mention what your policy might do to US inflation now at 0.2%• Fed Funds rate now at 0.5 % (50 cents/$100)
After Inflation & Unempl sheets finishedWrite a 1 page letter to Congressman Raul Grijalva2 fiscal policy changes you agree with, be sure to include the effects of those changes