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10/1 The Federal Reserve System Monetary Policy o 7 member Board of Governors – 14 year terms (pp. 26) o 1 chairman – Former Alan Greenspan – 4 Year term – 5 terms Tools of Federal Reserve (pp. 29) o Open market operations o Discount rate (also known as interest rate, but use discount rate) o Reserve requirement o Public Relations *All these tools are used to increase the money supply and stimulate the economy Discount rate vs. prime rate o Discount rate is the rate charged by the Federal Reserve to other member banks for loans. o Prime rate is the rate charged by banks to their most credit-worthy borrowers. Fiscal Policy (pp. 32) o Used by the Federal Government running from October 1 to September 30 every year The Federal Government is the largest consumer Federal Government o Revenue – the government makes money off our taxes (pp. 33) Individual income taxes, corporate income taxes, social security taxes, and other o Spending Mandatory Permanent laws
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Unformatted text preview: Discretionary 1 10/1 • Agreed-Congress o National Defense and Social programs are only discretionary o Annual spending exceeds annual revenue – Deficit (pp. 34) o Annual revenue exceeds annual spending – Surplus o For those born in 1989, the National debt was $2.6 trillion, in your lifetime you have seen the Debt increase 3 ¼ times. If the Debt increases 3 ¼ times in the next 18 years it will be $27.6 trillion. * Per person $92,000 • Deficits/National Debt matters for 3 reasons 1. Debt leads to spending more on interest… an escalating cost. 2. Puts a country at mercy to other countries. 3. Not coming to grips with spending what you can’t afford. • Start focusing more on the world economy to create a surplus • Common Causes of Financial Trouble o Excessive use of credit 39% o Lower income or unemployment 25% o Poor money management 15% o Divorce/separation 8% o Other 14% 2...
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This note was uploaded on 04/19/2011 for the course BUS 100 taught by Professor Mo during the Fall '08 term at Indiana.

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adownload_doc-6.php - Discretionary 1 10/1 •...

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