The Federal Reserve System. Who do you think is the most powerful person in the world?
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Transcript of The Federal Reserve System. Who do you think is the most powerful person in the world?
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The Federal Reserve System
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Who do you think is the most powerful person in the world?
http://www.forbes.com/powerful-people/
Check out this website for HW and read the article about the most powerful people in the world
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Goals of the FED
Full employment
Price stability
Economic growth through moderate long term interest rates and the stability of the financial system
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Structure of the Fed
Chairman ( now titled “Madame Chair”)
Board of Governors
FOMC
District Banks
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Functions of the FED
Provide Financial services
Supervise and regulate banks
Maintain stability of the financial system
Conduct monetary policy
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Tools of the FED
Discount rate
Reserve requirement
OMO
Interest on the reserve ( new tool as of 2008)
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Tools and the money creation process
How can each tool be used to change the money supply?
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2 types of Monetary Policy
Monetary Policy is counter-cyclical
Expansionary- “Easy money”
Contractionary- “Tight money”
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Balance Sheets
Left side shows assets’
Right side shows liabilities
Both sides must be equal
Net worth equals assets minus liabilities