ECO 372 Week 4 Federal Reserve Presentation

Topics: Monetary policy, Federal Reserve System, Central bank Pages: 11 (269 words) Published: March 11, 2015
Federal
Reserve
Presentation
University of Phoenix
July 2, 2012

Federal Reserve: Background
 Primary

job is to control inflation
 Avoid Recession
 Create Monetary policies

Adjusting the Discount
Rate
 Discourage

Banks
from borrowing
 Encourage
borrowing
 Higher discount
rates mean
restrictive
monetary policy.

Influence Banks in Setting
Interest Rates
 Banks

will adjust their specific interest
rates depending on the discount rate set
by the Federal Reserve.
 Changes in the discount rate can have a
large effect on lending rates by making
them more or less expensive.

Avoiding Inflation
 Monetary

operates
to avoid inflation
through
contractionary
monetary actions
in order to
decrease
economic growth.

US Dollar Purchasing Power
throughout History

Control Money Supply
 The

monetary policy can operate to
control money supply through fiscal
policies which increase spending and
drive consumers to purchase items.
 This then places money back into the
economy.

Stimulus Program
A

stimulus
program, although
a positive idea, is
very harmful to
the money supply
because it
increases inflation.

Negative Affects of Stimulus
Programs
 When

businesses are bailed out or taxpayers
receive a stimulus, the money is created
essentially from thin air as it has been
printed and pumped into the economy.
 Consumers who spend may increase money
supply among businesses, but the
consumers themselves are not being
encouraged to save or spend their money
wisely. This irresponsible behavior leads to a
crisis such as the housing bubble.

Conclusion

References
“How the Fed Works”. (2012). How Stuff
Works. Retrieved from
http://
money.howstuffworks.com/fed9.ht m
“Inflation”. (2012). Investopedia.
Retrieved from
http://
www.investopedia.com/terms/i/inflation
.asp#axzz1zX6U8Q1D
“The Discount Rate”. (2012). Federal
Reserve.
Retrieved from
http://
www.federalreserve.gov/monetarypolicy/d
iscountrate.htm



References: “How the Fed Works”. (2012). How Stuff
Works
“Inflation”. (2012). Investopedia.
“The Discount Rate”. (2012). Federal
Reserve.
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