1. The Federal Reserve

2. The Federal Reserve
The Central Bank of the United States

3. The Federal Reserve 2 Primary goals:
#1- Maximum Output (GDP) & Employment
#2- Stable Prices (keep inflation low)

4. (High GDP & Low Unemployment)
2 Conflicting Goals?
Stable Prices
(low inflation)
Maximum output
& employment
(High GDP & Low Unemployment)
What makes these 2-Goals in direct conflict?
High GDP & Low Unemployment (goal #1) increase inflationary pressures (goal #2)

5. The Federal Reserve
Main job: to regulate or “control” the size of the supply of money,
the total amount of money in circulation
How money is made
(2:30 into the clip see making of money)

6. How & Why is the Fed independent?
Congress wanted the Fed to make the best decisions possible, even if contrary to public opinion
Governors serve for
year term
Funding: no money from Congress; operating expenses paid from interest on the assets it holds

8. Federal Reserve Structure
Discount Rate=Interest rate that the Fed lends money directly to District Banks
(rarely used)
SF Fed Building—Market Street
Federal Reserve
12 District Federal
Reserve Banks
Meets 8 times a year to vote on Monetary Policy
Federal Open
Market Committee=
7 Governors
+ 5 District Bank
Presidents—meets 8 times
per year
Board of
Governors
(7 members)
Janet Yellen
Chairman
Boston
San Francisco
New York
Atlanta
Chicago
Dallas, etc.
Federal Funds Rate = Interest rate
that the 12 District banks charge
Each other on overnight loans
Member Banks
All national banks
Some state banks

9. Review Quiz
Trade Quiz
#1: What are the two conflicting responsibilities of the Federal Reserve?
Maximizing GDP & Employment while at the same time keeping inflation low

10. Review Quiz
#2: What are two ways the Fed has some political independence when it comes to making their decisions?
14-year term of office
Don’t rely on money from Congress to keep running

11. Review Quiz
#e: How many members of the Fed Board of Governors are there? 7

12. Review Quiz Trade Quiz #5: What is the “discount rate?”
The interest rate that the Federal Reserve charges on direct loans to the 12 District Banks

13. Review Quiz
Trade Quiz
#6: Who is on the Federal Open Market Committee (FOMC?
The 7 members of the Board of Governors and 5 of the presidents of the District Banks

14. Review Quiz
Trade Quiz
#7: What important decisions does the FOMC make?
What the FFR should be and how much money there should be in the economy

15. Q: Who is the current Chairman of the Federal Reserve?

16. Oh! Oh! That’s me! Janet Yellen!

17. Now that you know what our Chairman looks like, it’s time to play a short round of…
JANET YELLEN

18. Can YOU Spot Her?

19. Great Job!
Janet

20. JANET YELLEN

22. There she is!

23. JANET YELLEN?

25. Janet Yellen is too busy trying to keep the economy going; she doesn’t have time to go to the carnival!

26. Video
Open & Operating: The Federal Reserve Responds to 9-11