How do you feel like you did on the quiz yesterday? Bell Work How do you feel like you did on the quiz yesterday?

In Lak’ech by Luis Valdez Tu eres me otro yo Si te hago daño a ti, Me hago daño a mi mismo Si te amo y respeto Me amo y respeto yo You are my other me If I do harm to you, I do harm to myself If I love and respect you I love and respect myself

How do you feel like you did on the quiz yesterday? Bell Work How do you feel like you did on the quiz yesterday?

Quiz Results 2 3 4 5 6 Total A 1 B 9 C 7 14 12 49 D 8 23 F 10 15 16 20 1 B 9 C 7 14 12 49 D 8 23 F 10 15 16 20 75 (47%) Avg 61.1 60.9 63.9 61.4 54.4 60.3

Reflection What is one thing that you have a better understanding of now than you did yesterday when you took the quiz?

Chapter 16: Monetary Policy How does the Fed promote the economic goals of price stability, full employment, and economic growth?

Crash Course https://www.youtube.com/watch?v=1dq7mM ort9o

Structure of the Fed The Fed is privately owned by its member banks, not by the government. The Fed is said to be publicly controlled because it is directed by a seven-member board of governors who are appointed by the president to govern the Fed in the public interest. The twelve Federal Reserve district banks and their branches provide many of the same functions for banks that banks provide for individuals. The Federal Open Market Committee has the power to raise or lower interest rates. The most important advisory committee to the board of governors is the Federal Advisory Council, which meets four times a year and advises the Federal Reserve Board on matters concerning the overall health of the economy.

Responsibilities of the Fed Federal Reserve responsibilities include maintaining the money supply and the payments system, regulating and supervising banks, preparing consumer legislation, and serving as the federal government’s bank. Federal Reserve notes are printed by the U.S. Bureau of Engraving and Printing, and coins are produced by the Bureau of the Mint. The payments system includes the money supply, electronic transfer of funds, clearinghouses for checks, and online banking. Some of the Fed’s consumer protection activities have been transferred to the Consumer Financial Protection Bureau, but the Fed still supplies much financial information. The most important responsibility of the Fed is conducting monetary policy.

Fractional Reserves and Deposit Expansion Under a fractional reserve system, banks are required to keep a portion of their total deposits in the form of legal reserves. Banking with fractional reserves results in a monetary expansion process that increases the total money supply available to the public. Monetary expansion continues as long as the bank has excess reserves to lend and as long as lenders deposit part or all of that money.

Conducting Monetary Policy The Fed conducts monetary policy to expand or contract the money supply to affect the cost and availability of credit. The Fed changes interest rates by changing the size of the money supply. The three tools the Fed uses to conduct monetary policy are the reserve requirement, open market operations, and the discount rate. The Fed can raise or lower the reserve requirement, but it rarely uses this tool because other tools work better. The Fed’s most popular tool of monetary policy is the buying and selling of government securities in financial markets (open market operations). The discount rate is the interest the Fed charges on loans to financial institutions; although the Fed directly sets only the discount rate, this rate influences other interest rates, including the prime rate.

Econ in the Movies: Despicable Me https://www.youtube.com/watch?v=RaeIBeJ T5hY

Monetary Policy Dilemmas Leads and lags in the time it takes a policy to take effect make it difficult for the Fed to know exactly when to pursue or abandon a policy. Monetarism is a philosophy that allows the money supply to grow at a steady rate, at levels low enough to control inflation. Monetary policy can change interest rates, but the economy is not always responsive; changes in interest rates can only do so much. The quantity theory of money is a hypothesis that the supply of money directly affects the price level over the long term. The wage-price controls imposed by President Nixon in the early 1970s did not work; prices rose even though wage and price controls were in place.

Changing Nature of Economic Policy Discretionary fiscal policies were popular in the post- World-War II period, but their popularity declined after President Reagan took office. The Federal Reserve System has filled the void left by the decline of discretionary fiscal policy. The Fed is much more responsive to economic issues than the federal government. Supply-side policies have been popular, but they did little to help when the economy slumped in 2008. Policies used to stabilize the economy during the Great Recession included monetary policy, quantitative easing, active fiscal policies and passive fiscal policies.

In recent years, the fields of economics and politics have merged. Economics and Politics Today In recent years, the fields of economics and politics have merged. The main reason for differences of opinions among economists is that they place different importance on various problems. Most economic theories are a product of their times; as times and issues change, so does economic theory. The president’s Council of Economic Advisers is a three- member group that reports on economic developments and proposes strategies. Economists have helped the American people become more aware of the workings of the economy, which benefits everyone.

Fiscal and Monetary Policy Review https://www.youtube.com/watch?v=bv- uNNkE39I

Chapter 16 Review and Practice Answer questions 1 – 14 on p.487 - 488 Extra Credit questions 18 – 21 on p. 488