1. Understanding Monetary Policy
What the Fed?
Understanding Monetary Policy

2. The Fed is…
The Federal Reserve System (Fed) is the Central Bank of the United States
It uses MONETARY POLICY to influence the economy (stimulate or slow down)
Controls money supply and interest rates (which makes getting money easier or harder)

3. Actions of the Fed To Stimulate the Economy To Slow Down the Economy
Lower interest rates
Increase the money supply
Downside: inflation
To Slow Down the Economy
Raise interest rates
Decrease the money supply
Downside: potential unemployment & decrease in prices

4. Speculation Buy low and sell high to make profit
“Flipping” real estate
property, oil, gold, stocks
When many people do it, artificially increases demand and value (ex: housing & gas)
As a result, the thing is not worth nearly as much as it seems
Problem: creates a “bubble” that will inevitably burst

5. Housing Bubble