Monetary PolicyToday’s LEQ: How do Federal Reserve decisions affect the stability of the economy?

What is the Federal Reserve? “the Fed” Our nation’s central banking system Serves the banking needs of the

government and of individual banks Regulates the nation's banking system

& monitors and regulates the nation's money supply through monetary policy (actions the Fed takes to influence real GDP & the rate of inflation)

Structure of the Fed Overseen by the Board of

Governors Headquartered in Washington

D.C. Seven members appointed by the

Prez & approved by the Senate The Prez also appoints, from

among these seven members, the chair of the board of Governors (with Senate approval)

Ben Bernanke (2006 - ?)

PAUSE...Video ClipTimeline Activity

Use pages 415-416 to create an annotated timeline showing the history of central banking in the U.S.

Structure of the FedBoard of Governors

Serve fourteen-year terms

Terms are staggered Cannot be reappointed Geographical

restrictions ensure no one district is over-represented

Chairman of the Fed

Serves four-year term, which can be renewed

Acts as main spokesperson for the Fed

Think, Pair, Share: Why do you think the terms are set up this way?

Twelve District Reserve Banks The Fed is divided into twelve districts One Fed Reserve Bank is located in each Each bank’s board is made up of nine

directors Member banks elect 3 bankers & 3 leaders in

business The remaining 3 are appointed by the Board of

Governors District Prez is elected from among the nine

directors

Member Banks All nationally chartered banks are required

to join the Federal Reserve System Remaining members are state-chartered

that join voluntarily Each of the app. 4,000 Fed member banks

contributes a small amount of money to join the system

In return, they receive stock in the system Fed = privately owned

Think, Pair, Share: What are the benefits of having a privately owned central bank versus publicly owned?

PAUSE…Using your class notes and

pages 416-418 in your textbook, create a diagram showing the structure of the Federal Reserve

Provide a brief description for each part of the structure

Federal Advisory Council Collects info about each district and

reports to the Board of Governors about economic conditions within their districts

Consists of 1 member from each district (12 in total)

Federal Open Market Committee Makes key decisions about interest rates and the

growth of the U.S. money supply Members are drawn from the Board of Governors &

the 12 district banks All 7 members of the Board of Governors sit on the

FOMC 5 of the 12 district bank presidents also sit on the

committee – NY is permanent member while the rest serve 1-year terms on a rotating basis

After meeting with the FOMC, the chairman of the Fed announces decisions to the public

Announcements from the FOMC have a huge impact! Think, Pair, Share: What kind of impact do you think these

announcements have?

Enough history…What does the Fed do?!Functions of the Fed – Graphic

OrganizerUse pages 420-423 to

complete the provided chart outlining the main functions of the Fed

Be sure to include and define any bolded vocabulary

You keep mentioning “Money Supply”…Use pages 258-259 and page

422 to answer the questions on money supply

Be prepared to compare/contrast M1, M2, and M3

Quiz on Thursday, 10/11!!!Covers LEQ3 – Monetary PolicyHistory/Functions of the FedMoney SupplyTools of the Fed