1. The Federal Reserve Board

2. Parts of the Fed 1. The Board of Governors 2. District Banks 3. Federal Open Market Committees 4. Federal Advisory Council 5 Member Banks

3. The Board of Governors Seven Members 14 year term. Appointed by the President Approved by Congress Determine the discount rate and reserve requirement Chairperson – Ben Bernanke (4 year term.)

4. District Banks 12 Federal Reserve Banks Print Money, Clear checks, Hold Reserves, and Lend Money

5. Federal Open Market Committee 12 Members (7 Board and 5 District Board Representatives). Buy and Sell Government Securities Meet 8 times a year

6. Federal Advisory Council 12 members (one from each district) Advise the Board of Governors

7. Member Banks Half of the banks in the USA “National” in their name N.A. at the end of the bank

8. Fed’s Monetary Policy Monetary Policy Open Market Operation Reserve Requirement Discount Rate

9. Open Market Operation Buying and Selling of government bonds When the Fed buys bonds, it leads to expansion. When the Fed sells bonds, it leads to contraction.

10. Reserve Requirment The percentage of deposits the banks are required to keep on hand. (The lower the percentage, the more money circulates. The larger the percentage, the less money circulates.) Money multiplier formula Money mulitiplier = 1 / Reserve Requirement Fractional Reserve formula Total Deposits = Reserve / Reserve Requirement

11. Discount Rate The interest rates the Fed charges individual banks. The lower the percentage, the more money circulates in the economy. The higher the percentage, the less money circulates in the economy.