krugman's macroeconomics for ap* 27 margaret ray and david anderson module the federal reserve:...

KRUGMAN'SMACROECONOMICS for AP*

27

Margaret Ray and David Anderson

ModuleThe FederalReserve: Monetary Policy

What you will learnWhat you will learn

in thisin this ModuleModule::

• The functions of the Federal Reserve System

• The major tools the Federal Reserve uses to serve its functions

• Central Bank of U.S.

• Board of Governors

• 12 Federal Reserve Banks

The Federal Reserve SystemThe Federal Reserve System

The Functions of the FederalThe Functions of the Federal Reserve System Reserve System

• Provide Financial Services

• Supervise and Regulate Banking Institutions

• Maintain the Stability of the Financial System

• Conduct Monetary Policy

• Reserve Requirement

• Discount Rate

• Open-Market Operations

What the Fed DoesWhat the Fed Does

The Reserve RequirementThe Reserve Requirement

•The required reserve ratio & reserve requirement

•Federal Funds Market

•Federal Funds Rate

•Changes in the Reserve Requirement

•Not generally used as a tool of monetary policy

The Discount RateThe Discount Rate

•Discount Rate

•Discount Rate Relative to Fed Funds Rate

•Secondary tool of monetary policy

Open-Market OperationsOpen-Market Operations