The Federal Reserve


PPT – The Federal Reserve PowerPoint presentation | free to download - id: 7d9a81-NDNkN


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation

The Federal Reserve


The Federal Reserve Chevalier Spring 2015 Janet Yellen Yellen s Critics Economic Philosophy: Keynesian Phillips Curve Inverse relationship between unemployment and ... – PowerPoint PPT presentation

Number of Views:1
Avg rating:3.0/5.0


Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: The Federal Reserve

The Federal Reserve
  • Chevalier
  • Spring 2015

Warm-Up Review Notes
  • To pursue an expansionary monetary policy, what
    would the Fed do to the three tools of monetary
  • What is the Feds most important job?
  • What type of monetary policy would the Fed pursue
    during a recession? Contractionary or
  • Which group of the Federal Reserves policy
    making body controls the money supply?

  • The ease with which an asset can be converted
    into cash is called _________?
  • The money that banks must hold to secure deposits
    is known as ____________?
  • The Federal Reserve Act was sign in what year and
    by what president?

Janet Yellen
Yellens Critics
  • Economic Philosophy
  • Keynesian
  • Phillips Curve
  • Inverse relationship between unemployment and
  • Allowing inflation to rise could be a wise and
    humane policy if it increases output
  • Each percentage point reduction in inflation
    results in 4.4 loss in GDP

(No Transcript)
(No Transcript)
Structure of the FED
  • Board of Governors- 7 members appointed by the
    President and confirmed in the Senate with a SM
  • They serve 14 year terms
  • one appointment becomes vacant every two years
    for reasons of experience
  • job is to supervise and regulate the FED

Structure of the FED
  • FOMC- 7 members of the Board of governors and 5
    presidents of member banks
  • they decide monetary policy

12 FED Banks
Monetary Policy
  • The expansion or contraction of the money supply
    to influence the cost and availability of credit
  • In other words, how easy will money be available?
  • will fluctuate the availability of money based on
    economic factors (inflation, unemployment, GDP)

3 tools of monetary policy
  • Changing the discount rate- the rate at which the
    FED lends money to members banks
  • to raise it makes borrowing more expensive for
    banks and less likely for them to extend credit
    (money supply contracts)
  • to lower it makes borrowing less expensive for
    banks and more likely for them to extend credit
    (money supply expands)

3 tools of Monetary Policy
  • Open Market Operations- the buying and selling of
    US Treasury bonds
  • when bonds are bought by the FED, checks written
    by the FED add to reserves, expanding the money
  • when bonds are sold by the FED, checks written by
    buyers subtract from reserves, contracting the
    money supply

3 Tools of Monetary Supply
  • Reserve Requirement- The percentage of customer
    deposits a bank must hold as cash in reserve (in
    their vaults)
  • The FED can raise the R.R. (banks must hold a
    larger percentage of deposits as cash, reducing
    available funds to lend out this contracts the
    money supply)

3 Tools of Monetary Policy
  • The Fed can lower the R.R. (banks can hold a
    smaller percentage of customer deposits
  • to find out total amount of money created with a
    single deposit, the equation is
  • deposit amount/R.R.

Easy Money vs. Tight Money Policy
  • Easy money policy is the expansion of the money
    supply by making credit less expensive to obtain
  • Tight money policy is the contraction of the
    money supply by making credit more expensive to

Other Monetary Policy Tools
  • Moral suasion- communication between banks, the
    government, and citizens
  • Selective Credit controls- rules on who can
    borrow money