Monetary Policy Today’s LEQ: How do Federal Reserve decisions affect the stability of the economy?

What is the Federal Reserve?  “the Fed”  Our nation’s central banking system  Serves the banking needs of the government and of individual banks  Regulates the nation's banking system & monitors and regulates the nation's money supply through monetary policy (actions the Fed takes to influence real GDP & the rate of inflation)

Structure of the Fed  Overseen by the Board of Governors  Headquartered in Washington D.C.  Seven members appointed by the Prez & approved by the Senate  The Prez also appoints, from among these seven members, the chair of the board of Governors (with Senate approval) Ben Bernanke ( ?)

PAUSE...  Video Clip  Timeline Activity  Use pages to create an annotated timeline showing the history of central banking in the U.S.

Structure of the Fed Board of Governors  Serve fourteen-year terms  Terms are staggered  Cannot be reappointed  Geographical restrictions ensure no one district is over- represented Chairman of the Fed  Serves four-year term, which can be renewed  Acts as main spokesperson for the Fed Think, Pair, Share: Why do you think the terms are set up this way?

Twelve District Reserve Banks  The Fed is divided into twelve districts  One Fed Reserve Bank is located in each  Each bank’s board is made up of nine directors  Member banks elect 3 bankers & 3 leaders in business  The remaining 3 are appointed by the Board of Governors  District Prez is elected from among the nine directors

Member Banks  All nationally chartered banks are required to join the Federal Reserve System  Remaining members are state-chartered that join voluntarily  Each of the app. 4,000 Fed member banks contributes a small amount of money to join the system  In return, they receive stock in the system  Fed = privately owned Think, Pair, Share: What are the benefits of having a privately owned central bank versus publicly owned?

PAUSE…  Using your class notes and pages in your textbook, create a diagram showing the structure of the Federal Reserve  Provide a brief description for each part of the structure

Federal Advisory Council  Collects info about each district and reports to the Board of Governors about economic conditions within their districts  Consists of 1 member from each district (12 in total)

Federal Open Market Committee  Makes key decisions about interest rates and the growth of the U.S. money supply  Members are drawn from the Board of Governors & the 12 district banks  All 7 members of the Board of Governors sit on the FOMC  5 of the 12 district bank presidents also sit on the committee – NY is permanent member while the rest serve 1-year terms on a rotating basis  After meeting with the FOMC, the chairman of the Fed announces decisions to the public  Announcements from the FOMC have a huge impact! Think, Pair, Share: What kind of impact do you think these announcements have?

Enough history…What does the Fed do?!  Functions of the Fed – Graphic Organizer  Use pages to complete the provided chart outlining the main functions of the Fed  Be sure to include and define any bolded vocabulary

You keep mentioning “Money Supply”…  Use pages and page 422 to answer the questions on money supply  Be prepared to compare/contrast M1, M2, and M3

Quiz on Thursday, 10/11!!!  Covers LEQ3 – Monetary Policy  History/Functions of the Fed  Money Supply  Tools of the Fed