The Federal Reserve

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					THE FEDERAL RESERVE,
ECONOMIC CONDITIONS AND
INTEREST
Review!
THE FEDERAL RESERVE SYSTEM
 Decentralized     “Central” Bank
     Established by an Act of Congress in 1913 when
      Woodrow Wilson was President
     Consists of the Board of Governors and 12 Federal
      Reserve District Banks


 Goals
     To establish and maintain the public’s confidence
      in our country’s banking system
     To maintain a stable and growing economy
THE BODIES OF THE FEDERAL RESERVE
       Board of Governors
         Primary responsibility is conducting monetary
          policy
         Has 7 “governors” who are appointed by the
          President and confirmed by the US Senate
         No two of these governors can come from the
          same district
         Chairmen is Ben Bernanke
       12 Federal Reserve District Banks
         Responsible for regulating the banks and
          providing them a supply of currency
         Banker’s Bank
12 FEDERAL RESERVE DISTRICTS
MONETARY POLICY
 To   help ensure a stable economy
     Low unemployment
     Price stability


       prices are directly impacted by the
 Stable
 amount of money and credit in the economy
 (money supply)
MONEY SUPPLY IMPACT
 As   the Money Supply decreases…
   Demand for products and services decrease
   FED sells securities to decrease supply
   Could lead to RECESSION
          FED tries to avoid recession by increasing money supply and lowering
           interest rates
          Current Event!

 As   the Money Supply increases…
   Demand for products and services increase
   FED buys securities to increase supply
   Could lead to INFLATION
          Inflation is defined as rise in goods and services in an economy over a
           period of time
ECONOMIC INDICATORS
   Gross Domestic Product
     Total dollar value of goods and services produced in a
      county in one year
     “Standard of Living”
     US is one of highest in the world and is continuing to
      increase
   Consumer Price Index
     Average price level of a fixed basket of goods and
      services purchased by consumers
     Measures rate of inflation
     Continues to rise

   Unemployment
     Number of people without jobs who are willing and
      able to work
     Impacts consumer spending
     Increased in 2009, steady in 2010, expected to
      decrease in 2011
EARNING INTEREST
   Simple Interest

      I=PRT


   Compound Interest

                      nt
             r
      A  P 1  
             n

				
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posted:7/4/2012
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