1 Chapter one  The federal reserve system The federal reserve system  The business cycle The business cycle  The role of policy The role of policy  Summary of Major Points Summary of Major Points

2 The Federal Reserve System  The Federal Reserve is a quasi-independent government agency that serves as the central bank for the U.S. ( 美国 联邦储备体系是行使中央银行职能的半独立的政府机构。 )  the Fed influences the behavior of banks  regulatory policy  ability to affect interest rates and the quantity of funds available for borrowing or lending  The Fed performs monetary policy 货币政策：联储为促进经济正常稳定发展所采取的政策。  the Fed’s efforts to promote the overall health and stability of the economy

3  其监管政策目标在于建立一个稳健、效率、 竞争的金融体系。  联储的货币政策旨在通过影响利率和社会借 贷资金额度（信用范围），达到促进整个经 济健康稳定的目的。  尽管联储主要是通过储蓄机构实现政策传递， 但却对整个金融系统都有影响。

4 The Influence of the Fed’s Monetary Policy Overall performance or health of the economy: Inflation Unemployment Growth Economic behavior of households, businesses, governments, and foreigners Financial System The Federal Reserve

5 The business cycle  Good health for the economy has both short- and long-run dimensions  in the long-run, we would like economic growth  in the short-run, we would like to minimize the fluctuations from the long-run path  these short-run fluctuations of the economy are called the business cycle  经济周期：以商品或劳务的产出数量变化为衡量 标准的短期经济波动。

6 Long-Run Economic Growth and the Business Cycle Year Total Quantity of Good and Services Produced (Hypothetical) Long- Term Trend Peak Recession (Contraction) Expansion (Recovery) Fluctuation of the Economy (Cycling) Trough Expansion (Recovery)

7 The Business Cycle  During an expansion, economic activity increases and unemployment falls  an expansion ends at the peak  During a recession, economic activity falls and unemployment rises  a recession ends at the trough  扩张：经济周期中的某个阶段，该阶段的经济活动增加 且失业率降低。  萧条：经济周期中的某个阶段，该阶段的经济活动减少 且失业率增加。

8 The Role of Policy  The key question: Can policymakers manage the economy successfully?  can they use monetary policy to minimize short-run fluctuations?  can they use government spending and taxing decisions (fiscal policy) to speed up or slow economic activity as needed? ( 财政政策：为了刺激或减缓经济增长，政府所采取的支 出政策和税收政策。 )  can they change the growth rate of output over time?

9 The Role of Policy  Achieving these goals is difficult  we may not fully understand how the economy functions  policymakers may be reluctant to use policies because of potential side effects  the cure for the problem may not yet be known

10 The Role of Policy  关于经济政策在经济活动中所起到的确切作用，即 “ 政府干预主义 ” 的政策制定者应该怎样管理经济这 一问题，不同时期人们的看法不同。  Prior to the Great Depression, many economists viewed the economy as inherently stable with self- correcting tendencies  no need for corrective government action (laissez faire)  自由放任：认为政府不应该干预经济的观点。

11 The Role of Policy  The Great Depression altered this view  between 1929 and 1933, unemployment increased from 3 to 25 percent  this downturn was worldwide and persistent  Economist J.M. Keynes suggested that the economy could operate below full employment for some time  this provided an economic rationale for attempting to stabilize economic activity

12 The Role of Policy  The economy’s performance in the 1970s and early 1980s created doubt in the government’s ability to stabilize the economy  the growth trend of the economy was below that achieved in the 1960s  unemployment and inflation rates were both higher as well

13 Average Inflation, Unemployment, and Growth During Recent Decades

14 Summary of Major Points  Economics is concerned with how, given people’s unlimited wants, scarce resources are allocated among competing uses, how income is distributed, and how people allocate their incomes through spending, saving, borrowing, and lending decisions

15 Summary of Major Points  Finance focuses on the financial side of these decisions  the raising and using of funds by households, firms, and governments  The financial system coordinates and channels the flow of funds from lenders to borrowers and creates new liquidity for an expanding economy  this process has changed over time

16 Summary of Major Points  Spending units that spend less than their current income on consumption and investment are called net lenders  Spending units that spend more than their current income are called net borrowers

17 Summary of Major Points  In allocating funds among the various types of financial assets available, net lenders are concerned about the expected return, the risk of loss, and the liquidity associated with acquiring and holding a particular asset

18 Summary of Major Points  Direct finance involves lending directly to net borrowers  Indirect finance involves lending to a financial intermediary  financial intermediaries issue claims on themselves  lenders receive financial claims on the financial intermediaries and the borrowers receive funds from the financial intermediaries

19 Summary of Major Points  Financial intermediaries exist because they help to minimize the transactions costs associated with borrowing and lending  the financial services provided include appraising and diversifying risk, offering a menu of financial claims that are relatively safe and liquid, and pooling funds from individual net lenders

20 Summary of Major Points  The most important types of financial intermediaries are the depository institutions  these institutions are central to the process of determining the nation’s money supply  Other types of financial intermediaries are insurance companies, pension funds, mutual funds and money market funds, and finance companies

21 Summary of Major Points  The Federal Reserve is a quasi-independent government agency that serves as United States’ central bank  its regulatory policy is aimed at promoting a smooth-running, efficient, competitive system  its monetary policy influences interest rates and the volume of funds available  its influence spreads from depository institutions to the financial system

22 Summary of Major Points  Views on the appropriate role of policy in the economy have varied over time  how “activist” should policymakers be in trying to manage the economy?