The Federal Reserve and Monetary Policy. Chapter 16. Banking History. Monetary Policy: the actions the FED takes to influence the level of real GDP and the rate of inflation in the economy. The Federal Reserve Act of 1913. Passed by Congress to deal with problems of bank runs and panics.
The Federal Reserve and Monetary Policy
crises from getting out
Adjust interest rates and the money supply
Consist of the Board of Governors (7) and then 5 of the twelve regional bank presidents.
NY Permanent, others rotate 1 year terms
The Federal Reserve Functions
Chapter 16 Section 2
Handles their banking
Medicare, social security, and veteran benefits.
Banker and Agent
Has treasury department checking account
Agent by handling bonds, bills, notes and interest payments.
Supervising Lending Practices
Lender of Last Resort
Expanded role due to financial crisis of 2008
Watch the Demand for Money and use this info to stabilize the economy.
Prevent inflation and keep real GDP growing
Monetary Policy Tools
Chapter 16 Section 3
Monetary Policy and Macroeconomic Stabilization
Chapter16 Section 4
Good timing smoothes out the business cycle.
Bad timing intensifies the cycles