• http://www.kc.frb.org/fed101/indexflash.cfm

7- appt 14 yrs

Board of Governors

Chairman

Ben Bernanke12 Federal

Reserve Banks

12

FOMC

12 Bankers

Federal Advisory Council

25 Branches

3000

Member Banks

1913

The Anatomy of a Dollar BillThe Anatomy of a Dollar Bill

Dollar Bill FactsDollar Bill Facts US currency bills are 2.61 inches wide and 6.14 inches US currency bills are 2.61 inches wide and 6.14 inches

long; they are .0043 inches thick and long; they are .0043 inches thick and weigh 1 gram. weigh 1 gram. (All US currency was made smaller in 1928)(All US currency was made smaller in 1928)

All US Bills are cloth, not paper – 25% Cotton, 75% All US Bills are cloth, not paper – 25% Cotton, 75% Linen with red and blue synthetic fibers distributed Linen with red and blue synthetic fibers distributed throughout.throughout.

Currency is printed by the Bureau of Engraving Currency is printed by the Bureau of Engraving and printing. Each bill, regardless of denomination and printing. Each bill, regardless of denomination costs 4.2 cents to make. The BEP prints 16,650,000 $1 costs 4.2 cents to make. The BEP prints 16,650,000 $1 bills each day. bills each day.

The $1 bill has an average lifetime of 18-22 months. The $1 bill has an average lifetime of 18-22 months. Damaged bills are returned to the Fed and shredded. Damaged bills are returned to the Fed and shredded. Last year, the Fed destroyed around $7.5B worth of Last year, the Fed destroyed around $7.5B worth of currencycurrency

Issuing Federal Reserve District 2 = New York City

Seal of Issuing Federal Reserve District B = New York City

Seal of US Treasury

Engraving Plate Identifier and Bill Location Identifier

Signatures of Treasurer and Treasury Secretary

Engraving Plate Serial Number

Serial Number

Design Date

Great Seal of the US

“In God We Trust” added by Eisenhower in 1957

The Great Seal (Front)The Great Seal (Front)

13 leaves in the Olive 13 leaves in the Olive Branch (Right Talon)Branch (Right Talon)

13 arrows in left talon13 arrows in left talon 13 stars overhead13 stars overhead 13 Stripes on Shield 13 Stripes on Shield

(Blue Bar represents (Blue Bar represents congress) congress)

E Pluribus Unum: E Pluribus Unum: “From Many Comes “From Many Comes One”One”

The Great Seal (Back)The Great Seal (Back) The Pyramid had 13 steps The Pyramid had 13 steps MDCCLXXV1 = 1776MDCCLXXV1 = 1776 The Pyramid is unfinished The Pyramid is unfinished

(the US is an ongoing (the US is an ongoing project)project)

The western face is dark (the The western face is dark (the western US had yet to be western US had yet to be exploredexplored

The deity watches over usThe deity watches over us Annuit Coeptus = “God Has Annuit Coeptus = “God Has

Favored our Undertakings”Favored our Undertakings” Novus Ordo Seclorum = “A Novus Ordo Seclorum = “A

New Order Has Begun”New Order Has Begun”

Functions of the Fed:

• Regulates financial institutions

• Issues coin and currency

• Manages money supply

• Makes short term loans to banks

• Provides banking services to Gov’t

• Provides financial services to banks

Keeping a sound money system:

•Destroys unfit money

•Detects counterfeit money

•Removes obsolete bills

Services to Government:

• Accepts deposits

• Issues checks

• Redeems bonds and gov’t securities

Services to Banks:

• Distributes currency

• Clears checks (Clearing House)

• Transfers money

• Makes loans to banks

• Supervises banks

You Your Friend

Friend’s Bank

Federal Reserve San Francisco

Federal Reserve Philadelphia

Your BankCheck

Clearing

Sources of Income

• Interest on Government Securities

• Interest on short term loans

• Fees for services i.e.. Check clearing

The Fed’s main function is:

Monetary Policy- controlling the money

supply.

Three tools the Fed uses to control the money supply:

• Discount Rate

• Reserve Requirement

• Open Market Operations

Discount Rate: The interest rate that the Fed charges member banks for short term loans.

Reserve Requirement: The percentage of a banks deposits that must be set aside and not loaned.

Open Market Operations:The buying and selling of Government Securities (Bonds).

Fed Buys`

Fed Sells

The Fed

13 Fill-In (word bank)

12 True, False

9 Multiple Choice

3 Lists (of 3)

1 Chart

In Your Journal

• Paragraph form• What happens if there is too much or too little

money in the economy? (What conditions occur? Use the words recession and inflation)

• What could the Fed do to fix these issues?– Reserve Requirement

– Discount Rate

– Open Market Operations