Changing supply of order to influence an money in order to economy change the economy Federal Reserve Nation’s central bank Ensures that money System placed in US banks will Housed in 12 banks not disappear if they go across the country out of business (‘The Fed’) of Control inflation Federal Wants to stabilize the economy Reserve Curb recessions Things Fed uses to Sell - decreases money Government meet goals by supply (takes cash out) securities buying and selling them in the open Buy - increases money market supply (puts cash in) Open market Immediately affects Buying and selling operations supply, which will change government securities interest rate Low - encourages banks to borrow money (give more loans, put more money Interest rate that the Discount rate in economy) Fed charges on it makes to banks High - discourages to borrow money (give less loans, put less money in economy) Factors that Taxes, expenditure, affect the borrowing Things that can change the national economy economy GDP = C+I+G+Xn Reduce - boosts GDP (consumers buy more, Taxes affects (C) & (I) producers increase supply) Government spending Affects G Increase - boosts GDP Federal Open Market Committee FOMC 7 members of Board of Decides monetary Governors policy 5 presidents of district Reserve Percentage of cash that Gives Fed control over Requirement have to keep in money supply reserve (now 12%)
order to influence an economy Changing supply of money in order to change the economy Federal Reserve System (‘The Fed’) Nation’s central bank Housed in 12 banks across the country Ensures that money placed in US banks will not disappear if they go out of business of Federal Reserve Control inflation Curb recessions Wants to stabilize the economy Government securities Things Fed uses to meet goals by buying and selling them in the open market Sell - decreases money supply (takes cash out) Buy - increases money supply (puts cash in) Open market operations Buying and selling government securities Immediately affects supply, which will change interest rate Discount rate Interest rate that the Fed charges on it makes to banks Low - encourages banks to borrow money (give more loans, put more money in economy) High - discourages to borrow money (give less loans, put less money in economy) Factors that affect the national economy Taxes, expenditure, borrowing GDP = C+I+G+Xn Things that can change the economy Taxes affects (C) & (I) Reduce - boosts GDP (consumers buy more, producers increase supply) Government spending Affects G Increase - boosts GDP FOMC Federal Open Market Committee 7 members of Board of Governors 5 presidents of district Decides monetary policy Reserve Requirement Percentage of cash that have to keep in reserve (now 12%) Gives Fed control over money supply
econ_key_terms.docx