ECON 310 Lecture Notes - Lecture 8: Ben Bernanke, Insurance Policy, Openmarket
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Chapter 13: introduction to the fed (primary monetary policy decision maker) *next two exams will be more typical for econ, use the models you learn about to express some understanding* Liquidity preference model - interest rates - influences the levels of economic activity through the level of loanable funds. Quantity - money supply affects of prices and inflation rates. The fed is the p by influencing the money supply. The federal reserve banking system - some history. The mid 19th century was filed with bank failures: the us used representational currency for gold or silver issued by private banks. People valued the money based on belief that their money could be exchanged for gold. Problematic because the private banks could be close to bankruptcy, but their customers cannot be sure of just how credible they are. Took in deposits - borrowed from the customers and charges interest to gain profit.