1. The Federal Reserve System

2. Who do you think is the most powerful person in the world?  http://www.forbes.com/powerful-people/ http://www.forbes.com/powerful-people/  Check out this website for HW and read the article about the most powerful people in the world

3. Goals of the FED  Full employment  Price stability  Economic growth through moderate long term interest rates and the stability of the financial system

4. Structure of the Fed  Chairman ( now titled “Madame Chair”)  Board of Governors  FOMC  District Banks

5. Functions of the FED  Provide Financial services  Supervise and regulate banks  Maintain stability of the financial system  Conduct monetary policy

6. Tools of the FED  Discount rate  Reserve requirement  OMO  Interest on the reserve ( new tool as of 2008)

7. Tools and the money creation process  How can each tool be used to change the money supply?

8. 2 types of Monetary Policy  Monetary Policy is counter-cyclical  Expansionary- “Easy money”  Contractionary- “Tight money”

9. Balance Sheets  Left side shows assets’  Right side shows liabilities  Both sides must be equal  Net worth equals assets minus liabilities