Federal Reserve Presentation Student Name Principles of Macroeconomics/ECO372

Date
Instructor

Federal Reserve
Controls Economy
Money Supply Change Factors Monitory Policy & Inflation Reserve Ratio

Discount Rate
Open-Market Operations

Money Supply Change Factors

Unsustainable Growth Add Money Supply Sell bonds to Government
Inflation Change the interest rate.
Increase Interest Rate sell government bonds Lower the interest rate buy government bonds

High Unemployment Increase Money Supply

Monetary Policy & Inflation

Reserve Ratio
Controls Money Supply in Circulation Discount Rate Interest Rate Charged by Fed Open-Market Operations Buying Government Securities Selling Government Securities

Reserve Ratio
Money Supply Controlled by Reserve Deposit
Raising Requirements
Withhold Larger Portion of Funds

Lowering Requirements
Releases More Funds

Discount Rate
Higher Discount Rate
Commercial Banks Pay More Consumers Pay More Difficult for Consumers to Borrow Lower Discount Rate Commercial Banks Pay Less Consumers Pay Less Reduces Cost to Stimulate Economy

Open-Market Operations
Most Used Monetary Policy Accounting Practice Rather Than Printing Presses Treasury Securities
Bonds Bills Notes

Increase Money Supply

Fed Buys Treasury Securities

Decrease Money Supply

Fed Sells Treasury Securities

Decreases Money Supply

Stimulus Program Affect on Money Supply

Increases the amount of money in circulation
Will eventually affect interest rates Value of dollar goes down Inflation goes up

Money Supply Enough?

Federal Fund Rate
Record Low: 0-0.25% (National Inflation Association, 2011)

Bank Prime Rate

Record Low 3.25% for 3 years. (National Inflation Association, 2011)

Total Money Supply

Over $14 Trillion (National Inflation Association, 2011)
Over 40% increase since 2011 (National Inflation Association, 2011)

2011 Gross Domestic Product (GDP) - $67.7 Billion (Congressional Budget Office, 2012) 2011 Deficit - $10,127.6 Billion (Congressional Budget Office, 2o12). 2011 Deficit to GDP percentage 8.5%

References
Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin. Congressional Budget Office (2012). Updated Budget Projections: Fiscal Years 2012 to 2022. Retrieved on August 10, 2012 from http://www.cbo.gov/publication/43119. National Inflation Association (2011). The Federal Reserve Rates. Retrieved on August 20, 2012 from http://inflation.us/charts.html. Reynolds, H. (2001). The Federal Reserve System. Retrieved on August 18, 2012 from http://www.udel.edu/htr/American/Texts/fed.html.