10 - b. Controls Open Market Operations which is the buying...

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10% Reserve Requirement Bank A Bank B Bank C Assets Liabilities Assets Liabilities Assets Liabilities 20% Reserve Requirement Bank A Bank B Bank C Assets Liabilities Assets Liabilities Assets Liabilities 5% Reserve Requirement Bank A Bank B Bank C Assets Liabilities Assets Liabilities Assets Liabilities PART THREE – ROLE OF THE FEDERAL RESERVE Federal Reserve – Founded in 1913, must be politically independent to look after the LONG TERM goals of the economy. One job of the Fed is to act wisely to avoid “currency debasement”. What is “Currency Debasement?” Where has it occurred? The Federal Reserve implements MONETARY POLICY, what “lags” are the biggest concern with monetary policy? What about fiscal policy? Roles of the Fed
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1. Bank’s Bank a. Loans Money – Discount Rate b. Clears Checks What is the difference between the DISCOUNT RATE and the FEDERAL FUNDS RATE? 2. Set Monetary Policy a. Controls the Discount Rate
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Unformatted text preview: b. Controls Open Market Operations which is the buying and selling of bonds c. Can change the Reserve Requirement 3. Regulates Banks Leadership of the Fed 7 Governors appointed by the President for 14 year terms The Federal Open Markets Committees (F.O.M.C.) twelve votes include the seven governors and five of the twelve central bank presidents. There are 12 VOTING members of the FOMC. (7 non voting members) The Central Banks of the Fed help perform the duties of the Fed. Where are they located? More about Monetary Policy--- (Some but not all of this material is in Ch. 13, we may not cover this before we take Exam #3) How do expansionary monetary policies work and what are they? (Step by Step) What do the monetarists believe we should do about monetary policy? (Rules vs. discretion) We will spend a bit of time talking about the recent financial crisis also....
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10 - b. Controls Open Market Operations which is the buying...

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