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Name: ____________________________________________ Bell: __________ Date: _______________
The Federal Reserve System
What is the “Fed”?
The Federal Reserve System, also known as "The Fed," is the ____________ bank of the United States.
In its role as a central bank, the Fed is a bank for other ___________ and a bank for the
_____________ government. It was created to provide the nation with a safer, more flexible, and more
stable ___________________ and financial system. Over the years, its role in banking and the
economy has expanded. The Federal Reserve System is a network of _____________ Federal Reserve
Banks and a number of branches under the general oversight of the Board of Governors. The Reserve
Banks are the operating arms of the central bank.
The Federal Reserve’s responsibilities include:

conducting the nation’s monetary policy to help maintain _______________, keep
___________ stable, and keep _______________ rates relatively low

supervising and regulating _________________ institutions to make sure they are safe places
for people to keep their money and to protect __________________ credit rights.

providing financial services to depository institutions, the U.S. ______________________, and
foreign central banks, including playing a major role in clearing checks, processing
____________________ payments, and __________________________ and ______________
to the nation's banks, credit unions, savings and loan associations, and savings banks.
The Federal Reserve System also

conducts _____________________ on the U.S. and regional economies.

distributes ____________________ about the economy through publications, speeches,
educational seminars, and web sites.
Fighting Inflation
One important role of the Fed is to fight inflation. Inflation means that the general level of
__________ of goods and services is ____________. When inflation is __________, the prices of goods
and services can increase faster than consumers’ _______________, and that means the amount of
goods and services consumers are able to purchase goes _______________. In other words, the
purchasing power of money has ______________. With inflation, a _________buys less and less over
time. To _________________ inflation the Fed can take one or more of several actions to ________
the economy.
How the Fed influences the economy
The Fed can ____________ the economy by ____________ the money supply in the economy. To do
this the Fed:
 __________________ taxes

increasing government __________________

decreasing government __________________

__________________ the reserve requirement of private financial institutions
If the economy is going into recession, the Fed can stimulate the economy by increasing the money
supply in the economy. To do this the Fed:
 decreasing ______________

_________________ government ________________

_________________ government ________________

decreasing the _________________ requirement of private financial institutions
* reserve requirement = the amount of _____________ private financial institutions must have
available for ____________________ who want to make a cash _____________________
Who runs the Fed?
The Board of Governors oversees the Federal Reserve System. It is made up of _________ members
who are appointed by the ______________ and confirmed by the __________. The full term of a Board
member is _____ years, and the appointments are staggered so that one term expires on each evennumbered year. After serving a full term, a Board member may not be ________________. The
Chairman and Vice Chairman lead the Board. They are also ______________ by the President and
_______________ by the ________________. The terms for these positions are ______ years, but the
Chairman and Vice Chairman may be reappointed for an additional _______year term. Some people
suggest the ________________ has more influence over your life than the President. Why might that
be true?
teacher’s notes
The Federal Reserve System
What is the “Fed”?
The Federal Reserve System, also known as "The Fed," is the central bank of the United States. In its
role as a central bank, the Fed is a bank for other banks and a bank for the federal government. It was
created to provide the nation with a safer, more flexible, and more stable monetary and financial
system. Over the years, its role in banking and the economy has expanded. The Federal Reserve System
is a network of twelve Federal Reserve Banks and a number of branches under the general oversight of
the Board of Governors. The Reserve Banks are the operating arms of the central bank.
The Federal Reserve’s responsibilities include:

conducting the nation’s monetary policy to help maintain employment, keep prices stable, and
keep interest rates relatively low

supervising and regulating banking institutions to make sure they are safe places for people to
keep their money and to protect consumers’ credit rights.

providing financial services to depository institutions, the U.S. government, and foreign central
banks, including playing a major role in clearing checks, processing electronic payments, and
distributing coin and paper money to the nation's banks, credit unions, savings and loan
associations, and savings banks.

The Federal Reserve System also

conducts research on the U.S. and regional economies.

distributes information about the economy through publications, speeches, educational
seminars, and web sites.
Fighting Inflation
One important role of the Fed is to fight inflation. Inflation means that the general level of prices of
goods and services is increasing. When inflation is rapid, the prices of goods and services can increase
faster than consumers’ income, and that means the amount of goods and services consumers are able to
purchase goes down. In other words, the purchasing power of money has declined. With inflation, a
dollar buys less and less over time. To control inflation the Fed can take one or more of several actions
to slow the economy.
How the Fed influences the economy
The Fed can slow the economy by reducing the money supply in the economy. To do this the Fed:

increasing taxes

increasing government borrowing

decreasing government spending

increasing the reserve requirement of private financial institutions
If the economy is going into recession he Fed can stimulate the economy by increasing the money
supply in the economy. To do this the Fed:

decreasing taxes

decreasing government borrowing

increasing government spending

decreasing the reserve requirement of private financial institutions
* reserve requirement = the amount of currency private financial institutions must have available for
depositors who want to make a cash withdrawal
Who runs the Fed?
The Board of Governors oversees the Federal Reserve System. It is made up of seven members who are
appointed by the President and confirmed by the Senate. The full term of a Board member is 14 years,
and the appointments are staggered so that one term expires on each even-numbered year. After serving
a full term, a Board member may not be reappointed. The Chairman and Vice Chairman lead the
Board. They are also appointed by the President and confirmed by the Senate. The terms for these
positions are four years, but the Chairman and Vice Chairman may be reappointed for additional fouryear terms. Some people suggest the Chairman has more influence over your life than the President.
Why might that be true?