Presentation on theme: "The Federal Reserve and Monetary Policy"— Presentation transcript:
1The Federal Reserve and Monetary Policy Chapter 16
2The Federal Reserve and Monetary Policy What the Fed DoesMonetary policy includes all the Federal Reserve actions that change the money supply in order to influence the economy. Its purpose is to curb inflation or to reduce economic stagnation or recession.
3Section 1 - The Federal Reserve System Creating the FedGovernment struggled to stabilize economy until Federal Reserve ActCentral bank—a nation’s monetary authoritymonetary means “relating to money”Federal Reserve System—central bank of the U.S., called the Fedindependent organization within government; established 1913
4Duties of a Central Bank Most countries have a central bank- oversees banking systemHolding Reserves: reserves set aside for loans from the banks fundsAssuring Stability: in national banking and monetary systemControl the way money is circulatedSupervise banksLending Money: unlike other banks it lends without the purpose of making money. To serve private banks rather than individuals.
5The Duties of the FedFed uses regulation, oversight to protect bank customers, borrowersBanking services for private banks and government includeholding deposits, transferring funds, making loansHelps finance wars, stabilize economy in national emergenciesRegulates money supply; distributes currency— coins and paper money
6The Structure of the Fed Fed not a single national bank; has national and regional structurehas some independence from political influence; accountable to Congress
8The Structure of the Fed Board of Governors—sets policy; supervises operations of the Fedchairman is most influential member and spokespersonBen Bernanke12 district banks carry out policy; serve as central bank for regionsMember banks: all nationally-chartered banks; state banks may applymust buy district bank stock; cannot sell in open market
10The Structure of the Fed Federal Open Market Committee—supervises government security salesFederal Advisory Council—represents commercial banking industryConsumer Advisory Council—advises on consumer protection laws on borrowingThrift Institutions Advisory Council—needs of savings institutionsthrifts not regulated by Fed; must meet reserve requirements; may borrow