- Fixed Spending -Permanent programs - Entitlements -Salaries/Benefits -Social Security - Allows for choice in spending - New gov programs - Temporary Gov programs - Small portion of budget

I NDEPENDENT INSTITUTION – CREATED BY AN ACT OF C ONGRESS, C HAIR IS SELECTED BY THE P RESIDENT I NDEPENDENT INSTITUTION – CREATED BY AN ACT OF C ONGRESS, C HAIR IS SELECTED BY THE P RESIDENT “T HE B ANKER ’ S B ANK ” “T HE B ANKER ’ S B ANK ” P ROVIDES FUNDS TO NATIONAL AND LOCAL BANKS P LACES “ DISCOUNT R ATE ” ON THESE FUNDS I N TURN, BANKS CHARGE CUSTOMERS INTEREST D IRECT INFLUENCE ON THE AMOUNT OF MONEY IN CIRCULATION D IRECT INFLUENCE ON THE AMOUNT OF MONEY IN CIRCULATION I NFLATION C URRENCY V ALUE

P URCHASING G OVERNMENT S ECURITIES P URCHASING G OVERNMENT S ECURITIES $$ TO B ANKS = MORE LOANS TO GIVE R EDUCING D ISCOUNT R ATE R EDUCING D ISCOUNT R ATE C HARGE LESS $$ FROM BANK = BANK CHARGES LESS $$ FROM CUSTOMERS = MORE $$ AVAILABLE FOR SPENDING R EDUCING THE R ESERVE R EQUIREMENT R EDUCING THE R ESERVE R EQUIREMENT B ANKS CAN LEND MORE $$ TO CUSTOMERS B Y ENCOURAGING SPENDING, THE FED HOPES TO INCREASE PRODUCTION, EMPLOYMENT, ETC.; H OWEVER, THIS INCREASES THE RATE OF INFLATION E CONOMIC C ONTRACTION S ELLING G OVERNMENT S ECURITIES S ELLING G OVERNMENT S ECURITIES T AKE $$ FROM B ANKS I NCREASING THE DISCOUNT RATE I NCREASING THE DISCOUNT RATE C HARGE M ORE $$ FROM B ANKS = B ANK CHARGES MORE $$ FROM CUSTOMER I NCREASING THE R ESERVE R EQUIREMENT I NCREASING THE R ESERVE R EQUIREMENT L ESS $$ AVAILABLE TO C USTOMERS T HESE DEPRESS CONSUMER AND BUSINESS SPENDING, BUT ALSO TEND TO REDUCE THE RATE OF INFLATION