tailieunhanh - Lecture Essentials of Economics: Chapter 14 - Bradley, Cynthia Hill

Chapter 14 "Monetary policy", after reading this chapter, you should be able to: Describe how the Federal Reserve is organized, identify the Fed’s three primary policy tools, explain how open market operations work, tell how monetary stimulus or restraint is achieved, discuss how monetary policy affects macro outcomes. | Chapter 14 Monetary Policy The Federal Reserve System The Federal Reserve System (the Fed) was created in 1913 as the central banking system of the United States. A central responsibility of the Federal Reserve is monetary policy: the use of money and credit controls to influence macroeconomic activity. 14- The Federal Reserve System (the Fed) was created in 1913 and consists of two components: the headquarters in Washington, . and 12 District Banks. Figure 14- Note that the policy lever is now monetary policy. Federal Reserve District Banks The 12 district banks perform many critical services, including the following: Clearing checks between private banks. Holding bank reserves. Providing currency. Providing loans (called discounting). 14- The Fed does other things besides just changing the money supply. The Board of Governors The decision maker for monetary policy, designed to be independent of political pressure. Consists of seven members appointed by the President and confirmed by the . Senate. Board members are appointed for 14-year terms and cannot be reappointed. Terms are staggered every two years. 14- The Fed Chairman The most visible member of the Federal Reserve System. Selected by the President for a four-year term and may be reappointed. Ben Bernanke is the current Chairman of the Fed. 14- The Chairman is considered to be the second most powerful person in the ., after the President. Monetary Tools The Fed has the power to alter the money supply through three tools: Reserve requirements. Discount rate. Open-market operations. 14- The Fed has the power to alter the money supply. The money supply (M1) consists of currency held by the public, plus balances in transactions accounts. M1 is the narrowest definition of the money supply and the most liquid. Each tool is used to some extent, but open-market operations is by far the most popular and effective tool. Reserve Requirements By changing . | Chapter 14 Monetary Policy The Federal Reserve System The Federal Reserve System (the Fed) was created in 1913 as the central banking system of the United States. A central responsibility of the Federal Reserve is monetary policy: the use of money and credit controls to influence macroeconomic activity. 14- The Federal Reserve System (the Fed) was created in 1913 and consists of two components: the headquarters in Washington, . and 12 District Banks. Figure 14- Note that the policy lever is now monetary policy. Federal Reserve District Banks The 12 district banks perform many critical services, including the following: Clearing checks between private banks. Holding bank reserves. Providing currency. Providing loans (called discounting). 14- The Fed does other things besides just changing the money supply. The Board of Governors The decision maker for monetary policy, designed to be independent of political pressure. Consists of seven members appointed