“The Federal Reserve System and Monetary Policy”

The Federal Reserve System (FED) is known as America’s central bank.

The U.S. is broken up into 12 federal reserve districts. Louisiana is part of district #6 and #11.

The chairman of the FED is Janet Yellen. Some say she is the second most powerful person in the U.S. because of her influence over the economy.

Main Responsibilities of the FED 1.Deals with banking regulation and consumer credit 2.Acts as the government’s bank 3.Issues the nation’s currency (paper money and coins) 4.Conducts monetary policy

Monetary Policy the Federal Reserve controls the supply of money and the cost of credit

The current monetary policy of the United States has been to…. decrease interest rates so that consumers and businesses can borrow money at a lower rate.

Three Tools Used to Conduct Monetary Policy 1.Raise or lower the discount rate (rate Fed charges banks for loans) Lowering the rate encourages banks to borrow. Changes in the rate can also affect interest rates.

2. Raise or lower the reserve requirement for banks Banks have to keep a percentage of their money at the Fed. If Fed raises reserve requirements, banks have less money to lend.

3. Change money supply through open market operations. These are the purchase or sale of bonds and Treasury bills.

Bond Bonds that are issued by the government in order to borrow money from its citizens and invest it to make a profit.

Increase or Decrease Money Supply? Tools to Conduct Monetary Policy Increase Money SupplyDecrease Money Supply Discount Rate Reserve Requirement Buying and Selling Bonds

Principle and Interest Principle - The amount of money borrowed from a financial institution (bank). Interest - The fee that is paid for borrowing principle.

Money Questions

What is the name of the federal agency that prints paper money in the U.S.? Bureau of Engraving and Printing

What is the name of the federal agency that prints coins in the U.S.? U.S. Mint

Which department of the government do these agencies work with? Department of the Treasury

Who was the person that suggested we have one currency? Thomas Jefferson

Where was the first U.S. Mint located? Philadelphia

What two units of currency were made from copper? Penny and the half-penny

Why was the use of gold dust an ineffective way to pay for something? Messy and Inconsistent

How long did it take gold coins to go from California to Philadelphia? 6 months

In what year did the government finally step in to control coin-making? 1851

What was the initial problem with the $50 gold coin? Couldn’t make change

Where in California did the U.S. government finally make a mint? San Francisco

What new metal in 1859 replaced gold? Silver

How did the $50 coin get the name “$50 slug?” It was used as a weapon

Why is green ink used in printing paper currency? To prevent counterfeiting

Why do each of the engravers only create one part of the template? To prevent the engraver from printing money illegally.

Who is the only customer to the BEP and US Mint? Federal Reserve System (FED)

What metal was eliminated from dimes and quarters in 1965? Silver

What’s the base metals all coins are made from now? Copper and nickel

FDIC Federal Deposit Insurance Company insures individual accounts in banks for up to $250,000 If a bank goes out of business, you do not lose your savings

Personal Budget #1 thing to budget for is NEEDS: food, clothing, shelter Things like entertainment, vacations, etc are not needs and can wait Monthly Income: how much you make each month Monthly Expenses: how much your bills and needs cost Anything leftover is for wants

Credit Score the main tool banks use when a customer is attempting to borrow money A high credit score can result in a better chance of getting a bank loan.

Interest Rates Primary way banks make money

How to write a check

How to Fill in a Deposit Slip Date of Deposit Total Cash Deposit in Paper and Coins Write Check Numbers (more on Back) Write Amount of Check Back Total from More Checks Total Amount Depositing Cash Back You Might Want Total Amount Depositing minus Cash Back Signature if getting Cash Back

Government Finances

Federal Budget It is an annual plan outlining proposed spending for the coming year by the U.S. Government. This planning period is called the fiscal year and runs from Oct. 1 – Sept. 30.

Top Three Federal Government Expenditures. Social Security largest federal budget expenditure

National Defense

Medicare/Medicaid

Taxes The single most important way governments raise revenue is through taxes on income, sales, and property. Reasons why Americans pay taxes … to build and maintain highways and bridges. to provide public education. to provide money for the military.

Imposes the same percentage rate of taxation on everyone, regardless of how much they make. (a.k.a. flat-tax) Proportional Tax

Progressive Tax High income people pay higher percentage of income taxes and low income people pay lower percentage of income taxes We have this in the U.S.

Regressive Tax Imposes a higher percentage of taxation on low incomes than on high incomes. Examples: Gas tax Cigarette tax

Individual Income Tax The tax on people’s earnings. Accounts for the majority of the Federal government’s revenue.

Fiscal Policy the federal government uses its powers to tax and spend to benefit the economy It is the most popular way to influence the economy. Ex: Tax Cuts, Interest Rates

A federal budget deficit occurs when the government spends more money than predicted. Deficit: When tax revenues are less than spending

Deficit spending is when governments spend more money than they make. Sometimes the government plans deficit spending. Other times it occurs because of unforeseen events. Ex: Vietnam Ex: 9/11/01

Debt is money that has been borrowed but not yet paid back Each year the government runs up the federal debt due to deficit spending Federal Debt U.S. NATIONAL DEBT The Outstanding Public Debt as of 11 May 2015 at 01:14:51 PM GMT is: