The Federal Reserve System. Who do you think is the most powerful person in the world? 

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Presentation transcript:

The Federal Reserve System

Who do you think is the most powerful person in the world?   Check out this website for HW and read the article about the most powerful people in the world

Goals of the FED  Full employment  Price stability  Economic growth through moderate long term interest rates and the stability of the financial system

Structure of the Fed  Chairman ( now titled “Madame Chair”)  Board of Governors  FOMC  District Banks

Functions of the FED  Provide Financial services  Supervise and regulate banks  Maintain stability of the financial system  Conduct monetary policy

Tools of the FED  Discount rate  Reserve requirement  OMO  Interest on the reserve ( new tool as of 2008)

Tools and the money creation process  How can each tool be used to change the money supply?

2 types of Monetary Policy  Monetary Policy is counter-cyclical  Expansionary- “Easy money”  Contractionary- “Tight money”

Balance Sheets  Left side shows assets’  Right side shows liabilities  Both sides must be equal  Net worth equals assets minus liabilities