1. Complete all pages before the end of class is complete. NO TALKING!!!
Get a Ch. 16 Federal Reserve and Monetary Policy Packet off of the Podium.
Complete all pages before the end of class is complete.
NO TALKING!!!

2. Take out your homework to turn in.
Get a Reteaching Activity Packet off of the Podium.

3. Warm Up #33
Who controls how much money is in circulation, meaning, how it is made and how it is spent, and explain how they got that power?

4. Class Confession
We the Senior Class of 2016 will complete ALL of our assignments to best of our abilities and behave appropriately in class.
We will respect all faculty, staff, substitutes, classmates, and especially Mr. Wilcox.
We will graduate on time May 20, 2016 and become productive citizens in society.

5. ________________________________________
SSEMA2 The student will be able to explain the role and functions of the Federal Reserve System.
Determine and define vocabulary. Identify key terms within the standard. Define each term.
________________________________________

6. Scaffold understanding of the standard(s) and/or element(s)
Scaffold understanding of the standard(s) and/or element(s). Paraphrase the standard(s) and/or element(s). Rewrite the standard including synonyms or brief definitions in parentheses and in a different color following the key terms found in step 1.
The student will be able to explain (describe) the role (characteristics) and functions (purposes) of the Federal Reserve System (the organization that changes the money supply in order to stabilize the economy).

7. The Federal Reserve and Monetary Policy
SSEMA2
The student will be able to explain the role and functions of the Federal Reserve System.

8. The Federal Reserve and Monetary Policy
KEY CONCEPTS
Monetary 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.
WHY THE CONCEPT MATTERS
Monetary policy is one of the most important tools for addressing extremes in the business cycle.

9. The Federal Reserve Today
Structure and Organization of The System
The Federal Reserve System was created by the Federal Reserve Act in The Board of Governors, located in Washington, D.C., provides the leadership for the System.
Twelve regional Federal Reserve Banks and their branch offices carry out many of the System’s day-to-day activities.

10. Organization of Federal Reserve

11. Directs operations of the FED
Board of Governors
Directs operations of the FED
Establishes policies: i.e. reserve requirements and discount rates
Supervises 12 district Federal Reserve Banks
7 members appointed by President with Senate approval; 14 years.
Most Powerful Person:
Janet Yellen (Feb. 1, 2014)

12. Federal Open Market Committee
Meets 8-10 times per year
Buys and Sells Securities
Decides the course of action the FED should take to control the money supply
Uses tools of monetary policy

13. FOMC’s Open Market Operations.
The domestic trading desk then buys or sells Treasury securities on the open market. “Open market”-means that the Fed (FOMC) does business with securities dealers who compete on the basis of price.
When the Fed (FOMC) wishes to increase reserves, it buys securities; when it wishes to reduce reserves, it sells securities.
Open market operations ultimately affect interest rates and the performance of the U.S. economy.

15. Most Important Function of “The FED”
1. Control over the rate of growth of the money supply (regulating amount of $ in circulation)
Other Functions
Processing checks
Serves as government’s banker
Monetary Policy
Supervising member banks
Holding and setting reserve requirements
Supplying paper currency

16. Monetary Policy
Involves changing the rate of growth of the supply of money in circulation to affect the amount of credit, and therefore, business activity in the economy
Loose Money Policy: = credit is inexpensive to borrow and abundant and tries to increase aggregate demand.
Tight Money Policy: = credit is expensive and in short supply and to slow down business activity.
*Goal of Monetary Policy is to strengthen and stabilize the nation’s monetary system.

18. The Fed’s Monetary Tools
KEY CONCEPTS
Monetary policy—actions the Fed takes to change money supply
purpose is to influence the economy
Fed has three courses of action to take individually or in combination

19. The Fed’s Monetary Tools
Action 1: Open Market Operations
Open market operations—sales and purchase of government securities
Fed buys securities to expand money supply; sells to contract supply
Federal funds rate/ratio (FFR)—interest rate banks charge one another
Fed signals intent to buy or sell by announcing a target for the FFR
if lowers target, Fed buys bonds; if raises target, it sells bonds

20. The Fed’s Monetary Tools
Action 2: Adjusting the Reserve Requirement
Fed changes required reserve ratio to change the money supply
increase in RR reduces money supply;
decrease in RR expands money supply
RR averages 10–12% for transaction deposits, 0–3% for time deposits

21. The Fed’s Monetary Tools
Action 3: Adjusting the Discount Rate
Discount rate—interest rate Fed charges on loans to other banks
affects money supply because it determines reserves banks have to lend
Prime rate—interest rate banks charge their best customers
other borrowers pay 2-3 percentage points above prime
If discount rate rises, so do prime, business and consumer rates

22. Approaches to Monetary Policy
KEY CONCEPTS
Monetary policy used to promote growth and stability.
Expansionary monetary policy—plan to increase the money supply
Contractionary monetary policy—plan to reduce the money supply

23. Approaches to Monetary Policy
Policy 1: Expansionary Policy
Expansionary monetary policy also called easy-money policy
In a recession, Fed increases money supply to increase aggregate demand
Fed can buy bonds on open market, decrease RRR or discount rate
*most common practice is to buy bonds to make interest rates fall

24. Approaches to Monetary Policy
Policy 2: Contractionary Policy
Tight-money policy is another name for contractionary monetary policy
In inflationary times, the Fed decreases money supply to check (decrease) aggregate demand
Fed can sell bonds on open market, increase RRR or discount rate
*most common action is to sell bonds to raise interest rates

25. Closure Activity #29
Describe the organization of the Federal Reserve System (12 Districts, FOMC, and Board of Governors).
Define monetary policy.
Define the tools of monetary policy including reserve requirement, discount rate, open market operations, and interest on reserves.
Describe how the Federal Reserve uses the tools of monetary policy to promote its dual mandate of price stability, and full employment, and how those affect economic growth

26. Show What You Know! Georgia Milestone Questions
The board of seven appointed members who supervise
the operations of the Fed and set policy is called the
Board of Bankers
Board of Governors
Board of Regulators
Board of Trustees

27. Show What You Know! Georgia Milestone Questions
The central bank of the United States is called the
Federal Reserve System
Government Reserve System
National Reserve System
State Reserve System

28. Show What You Know! Georgia Milestone Questions
The board of the Fed that supervises the sale and
purchase of federal government securities is called the
Federal Bond Advisory Committee
Federal Open Market Committee
Federal Sale and Purchase Committee
Federal Securities Committee

29. Show What You Know! Georgia Milestone Questions
The fraction of the bank’s deposits that must be kept in
reserve by the bank is called the
required fraction quota
required fraction ratio
required reserve quota
required reserve ratio

30. The End
Any Questions?
Comments?
Concerns?

31. Definitions Quiz & Test Friday!
The Federal Reserve System
Monetary Policy
Inflation
Recession
Stagflation
Federal Reserve Banks
Federal Open Market Committee (FOMC)
Board of Governors
Janet Yellen
Prime Rate
Expansionary Monetary Policy
Currency
Contractionary Monetary Policy
Securities
Open Market Operations
Reserve Requirement
Discount Rate
Easy-money policy
Money Supply
Reserve Requirements
Circulation
Loose Money Policy
Tight Money Policy