Week of March 21AGENDA<br />GPS: SSEMI1b & SSEMA2<br />Raider Prep (Do Now): TODAY’S DO NOW<br />Raiders Learn (Lesson):<b...
Georgia Performance Standards:<br />SSEMI1  (Social Studies Economics Micro #1)<br />The student will describe how househo...
Georgia Performance Standard<br />Social Studies Economics Macro #2 (SSEMA2)<br />The student will explain the role & func...
Monetary Policy:  Tools of the Fed<br />
Macroeconomics:<br />Focus on the national economy & the role of the gov’t in it<br />The U.S. Gov’t uses 2 broad methods<...
Monetary Policy:  <br />actions taken by the Fed to expand or contract the money supply to affect credit & business activi...
RR –<br />Reserve <br />Requirement<br />OMO – <br />Open <br />Market Operations<br />D – <br />Discount<br />Rate<br />T...
OMO<br />E = BUY Securities<br />C = SELL Securities<br />Most Important Tool<br />Most Frequently Used Tool<br />
RR<br />% of bank deposits that must be held<br />in reserve & cannot be loaned (vault cash)<br />Very powerful & infreque...
RR<br />Today’s RR =  7- 10%<br />Money Multiplier (M) = 1/RR<br />How much in demand deposits (“new $”) can be generated ...
Example:<br />RR = 20% = 20/100 = 1/5<br />So M=1/RR = 1/ 1/5 = 1 X 5/1 = 5<br />This means that for every new dollar depo...
CW 10/5/10: Money Multiplier<br />RR = 25%, what is the money multiplier (m)?<br />RR = 10%, what is the money multiplier ...
D<br />Interest Rate the Fed charges banks to borrow money from it<br />E =     D; banks borrow more $, so loan more $, wh...
When should the Fed use an Expansionary (E) monetary policy?<br />During a recession or depression<br />(economy slows dow...
When should the Fed use an Contractionary (C) monetary policy?<br />During an inflation period or <br />when the economy g...
Money supply is composed of:<br />M1 Money<br />	$ that can be spent immediately<br />   Examples:<br />		   1.  currency,...
“Near Money”<br />	can be turned into currency relatively<br />   easily but involves an extra step<br />   Examples:<br /...
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Fed cont.

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Fed cont.

  1. 1. Week of March 21AGENDA<br />GPS: SSEMI1b & SSEMA2<br />Raider Prep (Do Now): TODAY’S DO NOW<br />Raiders Learn (Lesson):<br /> Notes: Monetary Policy: Tools of the FED<br />Raiders in Action (Learning Assessment):<br /> Structure of the FED Graphic Organizer<br />CW: Money Multiplier<br />Raiders Take Out (Homework):<br /> QUIZ FRIDAY<br /> TA5 Quiz Monday<br />
  2. 2. Georgia Performance Standards:<br />SSEMI1 (Social Studies Economics Micro #1)<br />The student will describe how households,<br />businesses, & governments are interdependent & <br />interact through the flows of goods, services, & money.<br />Explain the role of money & how it facilitates <br /> exchange.<br />SSEMA2 (Social Studies Economics Macro #2)<br />The student will explain the role & functions of the<br />Federal Reserve System.<br />Describe the organization of the Federal Reserve<br /> System.<br />
  3. 3. Georgia Performance Standard<br />Social Studies Economics Macro #2 (SSEMA2)<br />The student will explain the role & functions of the <br />Federal Reserve System.<br />Describe the organization of the FED.<br />Define monetary policy.<br />c. Describe how the Federal Reserve uses the tools of <br /> monetary policy to promote price stability, <br /> full employment, & economic growth.<br />
  4. 4. Monetary Policy: Tools of the Fed<br />
  5. 5. Macroeconomics:<br />Focus on the national economy & the role of the gov’t in it<br />The U.S. Gov’t uses 2 broad methods<br />of managing the economy/ money supply<br />Fiscal Policy<br />Monetary Policy<br />
  6. 6. Monetary Policy: <br />actions taken by the Fed to expand or contract the money supply to affect credit & business activity<br />Expansionary Monetary Policy (E) =<br />“loose”/ “easy” money policy; putting money into the economy; money is “created”<br />Contractionary Monetary Policy (C) = <br />“tight” money policy; taking money out <br />of the economy; money is “destroyed”<br />
  7. 7. RR –<br />Reserve <br />Requirement<br />OMO – <br />Open <br />Market Operations<br />D – <br />Discount<br />Rate<br />Tools of the Fed<br />
  8. 8. OMO<br />E = BUY Securities<br />C = SELL Securities<br />Most Important Tool<br />Most Frequently Used Tool<br />
  9. 9. RR<br />% of bank deposits that must be held<br />in reserve & cannot be loaned (vault cash)<br />Very powerful & infrequently used<br />because it hits all banks at one time<br />E = RR<br />more $ available for banks to loan<br />C = RR<br />Reduces $ available for loans<br />
  10. 10. RR<br />Today’s RR = 7- 10%<br />Money Multiplier (M) = 1/RR<br />How much in demand deposits (“new $”) can be generated from a deposit of $1<br />
  11. 11. Example:<br />RR = 20% = 20/100 = 1/5<br />So M=1/RR = 1/ 1/5 = 1 X 5/1 = 5<br />This means that for every new dollar deposited, the bank can generate $5 in “new”<br />loan money<br />So, if M = 5, a $10,000 deposit generates<br />$50,000 in new loan money <br />(deposit X M; $10,000 X 5 = $50,000)<br />
  12. 12. CW 10/5/10: Money Multiplier<br />RR = 25%, what is the money multiplier (m)?<br />RR = 10%, what is the money multiplier (m)?<br />If M = 4, what is the amount of new money generated on a $20,000 deposit?<br />4. If M = 2, what is the amount of new money generated on a $5,000 deposit?<br />5. What is the amount of new money generated on a $200 deposit if RR = 33%?<br />Answers:<br />RR = 25% = 25/100 = ¼ so M = 1/RR = 1/ ¼ = 1 X 4/1 = 4<br />RR = 10% = 10/100 = 1/10 so M = 1/RR = 1/ 1/10 = 1 X 10/1 = 10<br />4 X $20,000 = $80,000<br />2 X $5,000 = $10,000<br />RR = 33% = 33/100 = 1/3 so M=1/RR = 1/ 1/3 = 1 X 3/1 = 3<br /> so 3 X $200 = $600<br />
  13. 13. D<br />Interest Rate the Fed charges banks to borrow money from it<br />E = D; banks borrow more $, so loan more $, which people spend<br />C = D; banks borrow less $, so <br />loan less $, people spend less<br />Most Dramatic <br />& <br />Weakest Tool<br />
  14. 14. When should the Fed use an Expansionary (E) monetary policy?<br />During a recession or depression<br />(economy slows down too much)<br />
  15. 15. When should the Fed use an Contractionary (C) monetary policy?<br />During an inflation period or <br />when the economy grows too fast<br />
  16. 16. Money supply is composed of:<br />M1 Money<br /> $ that can be spent immediately<br /> Examples:<br /> 1. currency, coin (cash)<br /> 2. checkable deposits (demand<br /> deposits), debit cards<br /> 3. travelers checks<br />
  17. 17. “Near Money”<br /> can be turned into currency relatively<br /> easily but involves an extra step<br /> Examples:<br /> 1. savings accounts<br /> 2. time deposits (bonds, cd’s)<br /> 3. stock, mutual funds<br />M2 = M1 + Near Money<br />
  18. 18. Structure of the Federal Reserve System<br />_________________________________________ (______)<br />Primary Function:_________________________________________<br />Tools of the FED<br /> Tool Contraction Expansion<br />____________________________________________<br />2. _____________________________________________<br />3. _____________________________________________<br />#________ FED District Banks<br />#________ FED Branch Banks<br />Thousands of Member Banks<br />

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