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Chapter 11 Money and the Economy

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Presentation on theme: "Chapter 11 Money and the Economy"— Presentation transcript:

1 Chapter 11 Money and the Economy

2 Money Supply and Prices
Inflation Deflation Money Supply $ in circulation Increase = inflation Decrease= deflation Controlled by Federal Reserve Bank

3 Money Supply and Inflation

4 Federal Reserve Bank Created in 1913 to oversee banking
Controls monetary policy Money supply Interest rates Reserve requirements Chairman Ben Bernanke

5 Open Market Operations
Buying/Selling of Securities Buys: Increases Money Supply Cash in hands of consumers Sells: Decreases Money Supply Cash in hands of govt. Affects value of dollar

6 Monetary Policy Federal Reserve Actions
Designed to stabilize the economy Sometimes makes it worse Lag time 2-4 Quarters Ex. Creation of Housing Bubble Interest rates too low

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