Monetary Policy.

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Presentation transcript:

Monetary Policy

Federal Reserve Act Supported by President Wilson to restore public confidence in the banks. The Federal Reserve was established to restore public confidence in the banking system which had been collapsing. Remember the Panic of 1893 and the Klondike Gold Rush Created a network of 12 regional banks. Each regional bank was authorized to issue currency, called Federal Reserve notes (paper money). The Federal Government gained a strong hold on the economy by: controlling the money supply promoting economic growth protect against financial panics

From Gold Standard to Fiat Money Gold Standard means that for every note printed there is an equal value of gold in some bank Fiat Money is used as a medium of exchange and only has value because of regulation or law. The change from the Gold Standard to Fiat Money is caused by: Economic growth Government expansion Increase in the population Expansion of the US