Download to read offline
Uploaded byTravis Klein
Mon fed monetary policy
The document discusses key aspects of the US banking system including: 1) Types of money like demand deposits that depositors can access through checks and the central bank that controls monetary policy. 2) How the Federal Reserve ("the Fed") regulates banks and implements monetary policy through tools like open market operations and adjusting reserve requirements. 3) Why the Chairman of the Fed is powerful as monetary policy changes can increase or decrease the money supply and reserve rates.
More Related Content
Similar to Mon fed monetary policy
Mon fed monetary policy
- 2. Look carefully atyour money
- 3. Money vocabulary • Liquidity •Demand deposits • balances in bank accounts that depositors can access on demand by writing a check. • Central Bank • Controlling bank of each country, controls monetary policy
- 4.
- 7. The velocity ofmoney (also called velocity of circulation) is the average frequency with which a unit of money is spent in a specific period of time.
- 8. Without banks • Youwould have to pay cash for the following items: • College ($1500-3000/year) • New Cars $9000-35,000 • Small Business Loans ($10,000+) • Houses ($140,000-300,000) • Time would be spent counting and guarding your cash. • Time saving + safety
- 9. What if thebank goes out of business? • $250,000 per US account
- 10. How does theUS banking system work?
- 11. Does the bankhave to keep all the money you deposit on hand? NO, fractional reserve system
- 12. What is aCredit Union then? • Smaller, regional, non-profit, theme based, lower rates
- 13. Who regulates thebanks? • “The Fed” • 1913
- 14. How does “theFed” work?
- 15. Why is theChairman of the Fed sometimes thought of as the “second most powerful man in the US”? • Monetary change:: increases the reserve rate • Effect: • Monetary change: lowers reserve rate • Effect:
- 16. The Federal Reserve System • TheStructure of the Federal Reserve System: The primary elements in the Federal Reserve System are: 1) The Board of Governors 2) The Regional Federal Reserve Banks 3) The Federal Open Market Committee
- 17. The Fed’s Organization •The Fed is run by a Board of Governors, which has seven members appointed by the President and confirmed by the Senate. • Among the seven members, the most important is the chairman. The chairman directs the Fed staff, presides over board meetings, and testifies about Fed policy in front of Congressional Committees.
- 18. The Fed’s Organization • TheBoard of Governors Seven members Appointed by the President Confirmed by the Senate Serve staggered 14-year terms so that one comes vacant every two years. President appoints a member as chairman to serve a four-year term.
- 19. Who controls “theFed”?
- 20. The Fed’s Organization • TheFederal Open Market Committee (FOMC) is made up of the following voting members: The chairman and the other six members of the Board of Governors. The president of the Federal Reserve Bank of New York. The presidents of the other regional Federal Reserve banks (four vote on a yearly rotating basis).
- 21. The Fed’s Organization TheFederal Reserve Banks 12 District banks Nine directors Three appointed by the Board of Governors. Six are elected by the commercial banks in the district. The directors appoint the district president which is approved by the Board of Governors.
- 22. The Federal ReserveSystem The Federal Reserve Banks The New York Fed implements some of the Fed’s most important policy decisions.
- 23. The Fed’s Organization • The FederalOpen Market Committee (FOMC) Serves as the main policy-making organ of the Federal Reserve System. Meets approximately every six weeks to review the economy.
- 24. What does “theFed” do? Controls Money supply Supplies Money Clears Checks THE FED Sets Reserve Requirements Gov’t Accounting Supervise Banks
- 25. The Fed’s Organization Monetarypolicy is conducted by the Federal Open Market Committee.
- 26. Open-Market Operations • • The moneysupply is the quantity of money available in the economy. The primary way in which the Fed changes the money supply is through open-market operations. The Fed purchases and sells U.S. government bonds. DO AN EXAMPLE Contractionary vs. expansionary
- 27. Fed’s Tools • Openmarket operations • Reserve Rate • Discount Rate • Lender of last resort
- 28. Open-Market Operations • • To increase themoney supply, the Fed buys government bonds from the public. To decrease the money supply, the Fed sells government bonds to the public.
- 29. Changing the Discount Rate • Thediscount rate is the interest rate the Fed charges banks for loans. Increasing the discount rate decreases the money supply. Decreasing the discount rate increases the money supply.