PUP-3002 Lecture Notes - Lecture 9: Open Market Operation, Federal Funds Rate, Reserve Requirement
Document Summary
Concepts: the federal reserve system, the money supply, tools of monetary policy. Originally a lender of last resort to prevent bank panics. Today, also conducts monetary policy: controls the amount of money in economy. Board of governors: 7 members 14 year nonrenewable terms, 1 member is chair. Regional banks: 12 districts, frbny is most important, perform bank services. 12 members: board of governors, frbny president, 4 other district presidents (rotate) Meet every 6 weeks to vote on monetary policy. Independence: fed is self-inancing, fed governors serve long terms, monetary policy not approved by congress/ president. Why: economic vs. poliical goals, long-term vs. short-term goals. Economic goals: high employment, economic growth, low inlaion. Money supply: the amount of money in the economy at any given ime, efects interest rates (the amount of money out in the economy efects the interest rates) The rate at which a borrower has to pay back a loan.
