KRUGMAN'SMACROECONOMICS for AP*
27
Margaret Ray and David Anderson
ModuleThe FederalReserve: Monetary Policy
What you will learnWhat you will learn
in thisin this ModuleModule::
• The functions of the Federal Reserve System
• The major tools the Federal Reserve uses to serve its functions
• Central Bank of U.S.
• Board of Governors
• 12 Federal Reserve Banks
The Federal Reserve SystemThe Federal Reserve System
The Functions of the FederalThe Functions of the Federal Reserve System Reserve System
• Provide Financial Services
• Supervise and Regulate Banking Institutions
• Maintain the Stability of the Financial System
• Conduct Monetary Policy
• Reserve Requirement
• Discount Rate
• Open-Market Operations
What the Fed DoesWhat the Fed Does
The Reserve RequirementThe Reserve Requirement
•The required reserve ratio & reserve requirement
•Federal Funds Market
•Federal Funds Rate
•Changes in the Reserve Requirement
•Not generally used as a tool of monetary policy
The Discount RateThe Discount Rate
•Discount Rate
•Discount Rate Relative to Fed Funds Rate
•Secondary tool of monetary policy
Open-Market OperationsOpen-Market Operations