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Goals of the FED Full employment Price stability Economic growth through moderate long term interest rates and the stability of the financial system
Structure of the Fed Chairman ( now titled “Madame Chair”) Board of Governors FOMC District Banks
Functions of the FED Provide Financial services Supervise and regulate banks Maintain stability of the financial system Conduct monetary policy
Tools of the FED Discount rate Reserve requirement OMO Interest on the reserve ( new tool as of 2008)
Tools and the money creation process How can each tool be used to change the money supply?
2 types of Monetary Policy Monetary Policy is counter-cyclical Expansionary- “Easy money” Contractionary- “Tight money”
Balance Sheets Left side shows assets’ Right side shows liabilities Both sides must be equal Net worth equals assets minus liabilities