The Federal Reserve

The Federal Reserve

• Review - Economic Flow: 
• Circular Flow of money between:
• Firms (all businesses)
• households (all consumers)
• Gov’t programs (taxes)

• Inflation: The devaluation of money as the supply increases
• Supply up Price down
• Federal Reserve is the “Banker’s Bank”
• Where bank’s go to borrow $$$
• Regulate Banks
• Manage the Banking System
• Protect your deposits

• Maintain the value of the dollar
• Big Idea: “The Fed” can stimulate or slow down our economy
• Stimulate (or increase consumer spending)
• Lower the bank’s Reserve Requirement
• More $$$ - Banks            More $$$ - People
• Lower Interest Rates
• More $$$ - Banks            More $$$ - People
• Slow Down (or stop inflation)
• Do opposite on Requirement & Rates