Lesson 12 Notes
Federal Reserve System
The FED (meet regularly – 12 main branches)
Goal: to encourage economic growth by controlling inflation and unemployment
appointed by president approved by Congress not a party issue, its non-partisan. We want to our economy to grow.
We need inflation at 3% and unemployment at about 5% inflation – 5% unemployment of about. As inflation is at
3% our economy is growing. Unemployment at 5% means we have full employment. (Everybody's working that should be working)
We need some unemployment to keep new jobs created. Our growth rate tends to be 3%.
Take money out prices go down, but unemployment
goes up. Put money in prices go up, buy unemployment goes down. If money is taken out we have less money to buy stuff. The
three forms of money are check, credit, and cash. The two functions of money are score keeper, and place holder.
World banks mission is to reduce global poverty and to improve living standards. FED's interest rates in printing and
shredding to control the amount of money in the market. The money stays in the system for eighteen months. If there's too
much money in the economy it results to inflation. Each day the FED's put new money into the economy and shred money to keep
the flow of money in the economy balance. Actual international currency exchanged value are determined by the exchange rate
of two demands for currency.
If you take money out of the market, it lowers prices it raise unemployment. If you add money into
the market, you raise prices and lower unemployment. How the FED does take money out? They shred it raise interest rates,
(That means the use of money becomes more expensive.) You take money out of the market by putting it in the bank. You put
money in the system by printing it. How does the Congress put money into system or take it out? When you put money in –
you increase spending and lower taxes, taking money out – You lower spending and increase taxes.
Allen Greenspan – was appointed by a republican and reappointed
by a democrat. But, we need 3% inflation and 5% unemployment. Unemployment helps make it so you can hire workers.
