Monetrary Policy Flashcards
When Federal Reserve created
1913
Two components of the fed
Headquarters in Washington, D.C.
12 district banks
How many district banks I. The fed
12
Central responsibility of the fed reserve
Monitary policy
The use of money and credit controls to influence macroeconomic activity
Monetary policy
Fed reserve main responsibility
The use of money and credit controls to influence macroeconomic activity
- Board of governors
7 members Key decision maker Washington, D.C. 7 members appointed by pres confirmed by senate Chairman 4 yrs 14 yr term can't reappoint Ben Bernanke current chairman of the fed Terms staggered every 2 yrs
- Federal reserve banks
12 banks
24 branches
Monetary tools
Fed has power to alter the supply chain through
Reserve requirements
Discount rate
Open market operations
Avalibile lending capacity of the banking system
Money multiplier x excess reserves
Excess reserve
Total reserve - required reserves
The fed can increase AD by increasing the money supply by
Lowering reserve requirement
Drop discount rate
Buying more bonds to increase bank lending capacity
Horizontal AS
Output increases without any inflation
Vertical AS
Inflation occurs w/o changing output
Upward sloped AS
Both prices and output are affected by monetary policy
Federal Reserve System
The central banking system of the U.S.
Created in 1913
Two components
Head quarters in DC
12 district banks
