1. Monetary Policy

2. Federal Reserve Act Supported by President Wilson to restore
public confidence in the banks.
The Federal Reserve was established to restore public confidence in the banking system which had been collapsing.
Remember the Panic of 1893 and the Klondike Gold Rush
Created a network of 12 regional banks.
Each regional bank was authorized to issue currency, called Federal Reserve notes (paper money).
The Federal Government gained a strong hold on the economy by:
controlling the money supply
promoting economic growth
protect against financial panics

4. From Gold Standard to Fiat Money
Gold Standard means that for every note printed there is an equal value of gold in some bank
Fiat Money is used as a medium of exchange and only has value because of regulation or law.
The change from the Gold Standard to Fiat Money is caused by:
Economic growth
Government expansion
Increase in the population
Expansion of the US