2. The Federal Reserve

3. The Federal Reserve The Central Bank of the United States

4. The Federal Reserve 2 Primary goals: #1- Maximum Output (GDP) & Employment #2- Stable Prices (keep inflation low)

5. 2 Conflicting Goals? Maximum output & employment (High GDP & Low Unemployment) Stable Prices (low inflation) What makes these 2-Goals in direct conflict? High GDP & Low Unemployment (goal #1) increase inflationary pressures (goal #2)

6. The Federal Reserve Main job: to regulate or “control” the size of the supply of money, the total amount of money in circulation http://www.youtube.com/watch?v=rUzrMfDKI-E (2:30 into the clip see making of money) How money is made

7. How & Why is the Fed independent? Congress wanted the Fed to make the best decisions possible, even if contrary to public opinion Governors serve for year term Funding: no money from Congress; operating expenses paid from interest on the assets it holds

9. Federal Reserve Structure Meets 8 times a year to vote on Monetary Policy Federal Reserve Board of Governors (7 members) Janet Yellen Chairman Federal Open Market Committee= 7 Governors + 5 District Bank Presidents—meets 8 times per year 12 District Federal Reserve Banks Boston San Francisco New York Atlanta Chicago Dallas, etc. Member Banks All national banks Some state banks Federal Funds Rate = Interest rate that the 12 District banks charge Each other on overnight loans Discount Rate=Interest rate that the Fed lends money directly to District Banks (rarely used) SF Fed Building—Market Street

10. Trade Quiz #1: What are the two conflicting responsibilities of the Federal Reserve? Maximizing GDP & Employment while at the same time keeping inflation low Review Quiz

11. #2: What are two ways the Fed has some political independence when it comes to making their decisions? 14-year term of office Don’t rely on money from Congress to keep running Review Quiz

12. #e: How many members of the Fed Board of Governors are there? 7 Review Quiz

13. Trade Quiz #5: What is the “discount rate?” The interest rate that the Federal Reserve charges on direct loans to the 12 District Banks Review Quiz

14. Trade Quiz #6: Who is on the Federal Open Market Committee (FOMC? The 7 members of the Board of Governors and 5 of the presidents of the District Banks Review Quiz

15. Trade Quiz #7: What important decisions does the FOMC make? What the FFR should be and how much money there should be in the economy Review Quiz

16. Q: Who is the current Chairman of the Federal Reserve?

17. Oh! Oh! That’s me! Ben Bernanke! http://video.aol.com/video-detail/cnbccom-fed-chairman-ben- bernanke-testimony/3007286962 (testifying before House committee) (16:27) http://video.aol.com/video-detail/ben-bernanke-holds-qandampa-session/3681234450http://video.aol.com/video-detail/ben-bernanke-holds-qandampa-session/3681234450 (good Q & A session) (20:44) (Ron Paul confronts Bernanke) (3:32)

18. Now that you know what our Chairman looks like, it’s time to play a short round of…

19. Can YOU Spot Him?

20. Great Job!

23. There he is!

24. BEN BERNANKE?

26. Ben Bernanke is too busy dealing with the economic crisis; he doesn’t have time to go to the carnival!

27. Video Open & Operating: The Federal Reserve Responds to 9-11