Economics Chapter 15 The Federal Reserve

Section 1: Organization and Functions of the Fed Created in 1913 Made to end periodic financial panics The Fed Set Monetary Policy ▫Amount of currency in circulation ▫Reserve requirement- Percentage in the bank ▫Discount rate- Percentage charged to banks  Lower=lower Prime rate, interest on loans  Higher-Higher Prime rate

Organization Board of Governors ▫7 members ▫14 year term ▫Opening every two years Federal Advisory Council ▫12 members ▫Elected by 12 district banks ▫Meet 4 times a year ▫General business conditions

Organization Federal Open Market Committee ▫12 members ▫8 times a year ▫Currency, interest rates Banks ▫25 branch banks

Functions Check clearing Regulating money supply Supplying paper currency Supervising banks Acting as government’s fiscal agent Holding reserves and setting reserve requirements