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3Centralbank - Central Bank Read Chapter 4 Problems All As...

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Central Bank Read Chapter 4 Problems: All As a first step in learning about the conduct of monetary policy, the student needs to understand how the central bank in the United States the Federal Reserve System operates. The basic point that should be driven home is that although the Federal Reserve System has a complicated bureaucratic structure, in practice, it functions like a single central bank, headquartered in Washington, D.C. Students should enjoy the discussion of how foreign central banks are structured and how foreign central banks are similar or differ from the central bank in the United States. This   lecture   outlines   the   tools,   goals,   and   strategy   of   Federal   Reserve policymaking. Use of Figure 1 should help students understand the Feds basic strategy. Discussion of how the Fed has conducted monetary policy also will be worthwhile for several reasons. First, it presents students with many real-world examples that make the study of monetary policy more concrete. Second, it provides students with a review of the money supply process and how the Fed's policy tools work, thus giving them another pass at this material, which should solidify their understanding of it. Finally, it illustrates a point that deserves emphasis in class: although the Fed has frequently failed to control the money supply in the past, this does not mean that the Fed is incapable of exercising accurate control. Changes in the Fed's operating procedures and a serious commitment to monetary aggregate targets would probably result in greatly improved control over the money supply.
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1. Formal Structure of the Federal Reserve System Fed was structured to diffuse powers along regional lines, between the private sector and the government, and among bankers, businesspeople, and the public. This diffusion has resulted in the evolution of the Federal Reserve banks, the Board of Governors of the Fed system, the Fed Open Market Committee (FOMC), the Federal Advisory Council and around 4000 member commercial banks.
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2.Informel Structure of the Fed
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