TAILIEUCHUNG - Lecture Economics (6/e): Chapter 14 - Stephen L. Slavin

Chapter 14 - The federal reserve and monetary policy. This chapter presents the following content: The organization of the Federal Reserve System, reserve requirements, the deposit expansion multiplier, the tools of monetary policy, the feds effectiveness in fighting inflation and recession, the banking act of 1980. | Chapter 14 The Federal Reserve and Monetary Policy 14-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives 14-2 The organization of the Federal Reserve System Reserve requirements The deposit expansion multiplier The tools of monetary policy The Feds effectiveness in fighting inflation and recession The Banking Act of 1980 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Federal Reserve Act of 1913 created the Federal Reserve System To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes First United States Bank [ 1791 - 1811] Second United States Bank [ 1816 - 1836] The charters of both were allowed to lapse The 1907 bank crises caused the public to demand the government do something to keep this from happening again The Federal Reserve System 14-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Federal Reserve System The Federal Reserve has five main jobs Conduct monetary policy which is, by far, the most important job Monetary policy is the control of the rate of growth of the money supply to foster relatively full employment, price stability, and a satisfactory rate of economic growth Serve as lender of last resort to commercial banks, savings banks, savings and loan associations, and credit unions 14-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Federal Reserve System The Federal Reserve has five main jobs Issue currency Provide banking services to the . government Supervise and regulate our financial institutions 14-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Federal Reserve District Banks Each Federal Reserve District Bank is owned by the several hundred member banks in that district A commercial bank becomes a .

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