chapter 4 n.
Skip this Video
Loading SlideShow in 5 Seconds..
CHAPTER 4 PowerPoint Presentation
Download Presentation

Loading in 2 Seconds...

play fullscreen
1 / 11

CHAPTER 4 - PowerPoint PPT Presentation

  • Uploaded on

CHAPTER 4. Functions of the Fed. CHAPTER 4 OVERVIEW. This chapter will: A. Identify the key components of the Fed B. Describe how the Fed influences monetary policy. A. Organization of the Fed. 1. Federal Reserve District Banks a. 12 national districts

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'CHAPTER 4' - edolie

Download Now An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapter 4


Functions of the Fed

chapter 4 overview

This chapter will:

A. Identify the key components of the Fed

B. Describe how the Fed influences monetary policy

a organization of the fed
A. Organization of the Fed

1. Federal Reserve District Banks

a. 12 national districts

b. New York is considered most important

c. Member banks (those commercial banks) must purchase stocks in their Federal Reserve district bank

d. Each district has 9 directors

e. District banks:

1.) clear checks

2.) replace old currency

3.) provide loans to member banks

4.) collect economic data and conduct research

a organization of the fed1
A. Organization of the Fed

2. Member Banks

a. Required of all nationally chartered banks

b. At present, about 35% of all banks are member banks

c. Member banks hold about 70% of all bank deposits in the U.S. economyy

a organization of the fed2
A. Organization of the Fed

3. Board of Governors

a. Composed of 7 members appointed by the President for a 14 year non-renewable term

b. Chair selected by President to serve a renewable 4 year term

Alan Greenspan (1987-2006); Ben Bernanke (2006- )

c. Roles of the Board:

1.) regulate commercial banks

2.) control monetary policy:

revise reserve requirements on depository institutions; change interest rate; buying or selling bonds through Federal Open Market Committee.

a organization of the fed3
A. Organization of the Fed

4. Federal Open Market Committee (FOMC)

a. Made up of 7 members from the Board of Governors plus the presidents of 5 district banks. Chair of FOMC is also the Chair of the Board of Governors.

b. Main goals:

1.) achieve stable economic growth

2.) stabilize inflation

b monetary policy tools
B. Monetary Policy Tools

1. Open Market Operations

a. FOMC Meets 8 times/year

b. Communication to the Trading Desk

c. Role of the Trading Desk

d. Fed purchase of Securities: increase in money supply

e. Fed sale of Securities: decrease in money supply

Discussion: how open market operations affect all interest rates?

b monetary policy tools1
B. Monetary Policy Tools

2. Adjusting the interest Rate lending to depository institutions to influences the market interest rates

3. Adjusting the Reserve Requirement Ratio

Reserve Requirement Adjustments affect Money Growth because higher reserves lead to less borrowing and

lower reserves lead to more borrowing

c global monetary policy
C.Global Monetary Policy

Each country has its own central bank that controls the money supply and monetary policy

1. A Single Eurozone Monetary Policy

a. Impact of the Euro on Monetary Policy

1.) 12 European countries made their currency the euro

2.) European Central Bank based in Frankfurt

3.) Monetary policy set for the 12 members

b. Variations in the Value of the Euro

fluctuated widely since introduced in1999

  • 1. The structure of Fed
  • 2. The goal of Federal Open Market Committee
  • 3. How does Fed affect money supply
  • 4. Homework Assignment 3: Questions and Applications 2, 3, 9.

more assignment 3 in Chapter 5.