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Federal Reserve Presentation

Federal Reserve Presentation. Makeysha D. McKinnis ECO 372/Principles of Macroeconomics August 5, 2013 Kathleen Crump. Factors Influence Federal Reserve Adjusting the Discount Rate. Weak Economy Low Employment Levels High Price Fluctuations Low Economy Production Capacity

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Federal Reserve Presentation

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  1. Federal Reserve Presentation Makeysha D. McKinnis ECO 372/Principles of Macroeconomics August 5, 2013 Kathleen Crump

  2. Factors Influence Federal Reserve Adjusting the Discount Rate • Weak Economy • Low Employment Levels • High Price Fluctuations • Low Economy Production Capacity • High Federal Funds Rates

  3. Discount Rate Affect Decisions of Banks Specific Interest Rates • Lower Discount Rates: • Banks borrow more reserves • Increase in loan offers • Lower interest rates • Increased Discount Rates: • Bank reserve decrease • Fewer loan offers • Higher interest rates

  4. Monetary Policy Aim to Avoid Inflation • Contractionary monetary policy: • Selling of U.S. Treasury Securities-Open Market Operations • Increase in the Discount Rate • Increase in Reserve Requirements • Control Money Creation • Decrease in Government Spending • Increased Taxes

  5. Federal Reserve Controlling Money Supply

  6. Monetary Policy Control the Money Supply • With more money, aggregate expenditures are greater • Low interest rates • Investment • Expenditures • Government purchases • Net exports • Consumption expenditures

  7. Monetary Policy Control the Money Supply With less money, aggregate expenditures are lower High interest rates Investment expenditures decrease Government spending decreases Net exports Consumption expenditures decrease

  8. Stimulus Program Affect the Money Supply? • Potential Economic Stimulus: • Tax cuts for individuals. • Tax cuts for businesses. • Expenditures on public works. • Investments in research and development.

  9. Currently, what indictors are evident that there is too much or too little money within the economy • Too Much Money Too Little Money • Consumer Spending rises Decline in purchasing power • Higher Demand for products Low Demand for Products • Supply of products decrease Lower Prices • Prices rise too quickly

  10. References • Obringer, L.A,. (2002)."How the Fed Works“. Retrieved from HowStuffWorks.com. <http://money.howstuffworks.com/fed.htm>  Jul 31, 2013. • Schwartz, A.J. "Money Supply." The Concise Encyclopedia of Economics. 2008. Library of Economics and Liberty. Retrieved August 3, 2013 from the World Wide Web: http://www.econlib.org/library/Enc/MoneySupply.html • Graphic imagesof the government. Retrieved from Bing search engine http://www.bing.com/images/search?q=images+of+federal+reserve&id=DCC8F15CE944E7080F9530702BE55A014E2752C2&FORM=IQFRBA#a August 5,2013 • http://www.ehow.com/info_8152107_federal-reserve-determine-interest-rates.html eHow money.com retrieved on August 3, 2013 • Select CD Rates. Retrieved from Select CD Rates.com http://www.selectcdrates.com/controlling-the-money-supply-and-monetary-policy/on August 5,2013

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