Lecture_Economics_Notes_4-22-2010

Lecture_Economics_Notes_4-22-2010 - Lecture Notes Chapter...

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Lecture Notes Economics T-Th A. Ordonez Chapter 21 & 22 809-195-3K1C 4/22/10 Three Primary Functions of the Fed o Regulates banks to ensure they follow federal laws intended to promote safe and sound banking practices. o Acts as a banker’s bank, making loans to banks and as a lender of last resort. o Conducts monetary policy by controlling the money supply. The Federal Open Market Committee (FOMC) Serves as the main policy-making organ of the Federal Reserve System. Meets approximately every six weeks to review the economy. The Federal Open Market Committee (FOMC) is made up of the following voting members: o The chairman and the other six members of the Board of Governors. o The president of the Federal Reserve Bank of New York. o The presidents of the other regional Federal Reserve banks (four vote on a yearly rotating basis). Monetary policy is conducted by the Federal Open Market Committee. o The money supply refers to the quantity of money available in the economy. o Monetary policy is the setting of the money supply by policymakers in the central bank. The Federal Open Market Committee Open-Market Operations o The money supply is the quantity of money available in the economy. o The primary way in which the Fed changes the money supply is through open- market operations. The Fed purchases and sells U.S. government bonds. Open-Market Operations o To increase the money supply, the Fed buys government bonds from the public.
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