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Download Aim: How does the Federal Reserve regulate the money supply?
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Aim: What are the functions of the Federal Reserve? Do Now: What role of the Federal Reserve is shown in this photo? What qualifications do you think this employee needs to do her job? Organization of the Federal Reserve System Established in 1913 Is in charge of the nation’s monetary policy Determines how much money is available, how easily it can be borrowed, and how costly it will be Monetary Policy Involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of credit Functions of the Federal Reserve Clearing Checks Acting as the Federal Government’s fiscal agent Supervising member banks Holding reserves and settling reserve requirements Supplying paper currency Regulating the money supply Consumer Protection – Truth in Lending (Chp 4) Money Supply and the Economy Loose v Tight Money Policies Loose Money Policy Tight Money Policy Loose Money Policy “Expansionary” • Borrowing is Easy • Consumers buy more • Businesses expand • More people are employed • People spend more • Inflation Tight Money Policy “Contractionary” • Borrowing is difficult • Consumers buy less • Businesses postpone expansion • Unemployment increases • Production is reduced • Recession What will happen in this scenario? Why? Loose Money Policy An Increase in: Leads to…