This document discusses the monetary system and the role of money and central banking. It explains that the Federal Reserve regulates the US monetary system and controls the money supply through tools like open market operations, reserve requirements, and interest rates. Commercial banks also influence the money supply through fractional-reserve banking, where they hold a portion of deposits as reserves and lend out the rest, expanding the overall money supply through the money multiplier effect.
This document discusses the monetary system and the role of money and central banking. It explains that the Federal Reserve regulates the US monetary system and controls the money supply through tools like open market operations, reserve requirements, and interest rates. Commercial banks also influence the money supply through fractional-reserve banking, where they hold a portion of deposits as reserves and lend out the rest, expanding the overall money supply through the money multiplier effect.
The document discusses the monetary system and the role of money and central banking. It describes how money serves as a medium of exchange, unit of account, and store of value. It explains how the Federal Reserve regulates the US monetary system by controlling the money supply through tools like open market operations, reserve requirements, and interest rates. It also discusses how fractional-reserve banking allows banks to create money when they issue loans.
The document provides an overview of the international financial system (IFS). It defines the IFS as the global system consisting of financial institutions, regulators, and other players that operate internationally. The key components of the IFS include money, banking/financial institutions, financial instruments, financial markets, and central banks. It also distinguishes the IFS from the international monetary system (IMS) and outlines some of the major types of financial markets and terms related to the IFS.
This document discusses the monetary system and the role of money and central banking. It explains that the Federal Reserve regulates the US monetary system and controls the money supply through tools like open market operations, reserve requirements, and interest rates. Commercial banks also influence the money supply through fractional-reserve banking, where they hold a portion of deposits as reserves and lend out the rest, expanding the overall money supply through the money multiplier effect.
The document discusses key concepts in finance including present value, time value of money, risk and risk management, and asset valuation. It explains that present value calculates the current amount needed to generate a future sum given an interest rate. It also describes how risk-averse individuals can reduce risk through insurance, diversification, or accepting lower returns. Finally, it summarizes the efficient market hypothesis that asset prices reflect all available information.
This lecture discusses international banking and the associated risks. It begins by defining international banking as transactions crossing national boundaries. It then examines reasons for the growth of international banking since the 1960s. The key risks discussed are sovereign risk, risks in the international interbank market, and currency risk. Historical banking crises are reviewed like the Latin American debt crisis in the 1980s and Asian Financial Crisis in 1997 to highlight lessons learned about risks in unregulated international banking.
The document provides an overview of various international financial markets including the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It discusses the motives for investors, creditors, and borrowers to use these international markets and how they allow funds to flow more freely globally. The summary briefly outlines some of the key international financial markets and their roles in facilitating international investment and trade.
The document discusses the different types of financial markets including capital markets, commodity markets, money markets, derivatives markets, insurance markets, foreign exchange markets, and government securities markets. It provides details on the key segments within capital markets such as stock markets and bond markets. It also discusses the regulatory bodies that govern the different financial markets in India.
The document discusses key elements of international financial systems including:
1) It defines international finance and discusses topics like exchange rates and foreign direct investment.
2) The global financial system consists of institutions that operate internationally, as opposed to nationally or regionally, and includes organizations like the IMF and central banks.
3) Core elements of any financial system include money, banking institutions, financial markets, instruments, and services.
The document provides information about Special Drawing Rights (SDRs) created by the International Monetary Fund. It discusses that SDRs were created in 1969 as a supplemental international reserve asset intended to supplement a shortfall of gold and US dollars. The value of an SDR is defined by a weighted basket of currencies including the US dollar, Euro, British pound, and Japanese yen. SDRs are allocated to IMF members based on their IMF quota and can only be exchanged between central banks for freely usable currencies.
International Financial Market & International Monetary System Itmamul Akwan
油
The document discusses international financial management and markets, emphasizing the mechanisms for fund transfer between lenders and borrowers across national borders, and the roles of various financial institutions. It outlines key functions of financial markets, including capital raising, price determination, risk sharing, and the facilitation of international transactions, as well as categorizing different segments of financial markets. Additionally, it defines the international monetary system and its features, stages, and implications for managers in navigating currency volatility and influencing government policies.
The document discusses Special Drawing Rights (SDRs), which were created by the IMF in 1969 as a supplementary international reserve asset to help address shortfalls in preferred reserve assets like gold and the US dollar. SDRs are neither a currency nor a claim on the IMF, but are instead exchangeable for currencies from IMF member countries. The value of an SDR is determined by a basket of currencies and SDRs can be used between countries to supplement foreign exchange reserves. SDRs have played a role as an alternative reserve asset during periods of US dollar weakness or lack of liquidity.
The document provides a comprehensive overview of financial systems, detailing their meaning, components, and functions, including financial institutions, markets, instruments, and services. It categorizes financial institutions into depository, contractual, and investment types, and explains the significance of financial markets in resource transfer and economic growth. Additionally, it outlines the classifications of financial markets, such as capital and money markets, and highlights the roles of various participants and instruments within these systems.
Special Drawing Rights (SDRs) are an IMF monetary unit created in 1969, defined as a weighted average of four major currencies and recalculated every five years. SDRs serve as an accounting unit and aim to replace gold and silver in international transactions, offering benefits such as stability and reduced risk for lending countries. However, they also face criticisms regarding liquidity, limited currency representation, and associated geopolitical risks.
Special drawing rights (SDR) and Optimum currency area (OCA)Piyush Patidar
油
This document discusses Special Drawing Rights (SDR) and Optimum Currency Areas (OCA). It defines SDR as an international reserve asset created by the IMF in 1969 used for balance of payments settlements. It explains that SDR was created to support the Bretton Woods system and is now valued as a basket of currencies. The document also outlines OCA theory and criteria for an optimal currency region, noting regions with openness, diverse production, mobile labor and homogeneous preferences are more suited for a single currency. It concludes benefits of an OCA include reduced costs and increased trade while costs include constrained monetary and fiscal policies.
The IMF was conceived at the 1944 Bretton Woods conference to establish a framework for postwar economic cooperation and avoid competitive currency devaluations that worsened the Great Depression. The IMF formally began in 1945 with 29 members and its first loan was to France in 1947. The IMF's purpose is to ensure stability of the international monetary system and promote sustainable economic growth. It provides loans, technical assistance, policy advice and surveillance to its 188 member countries. The IMF's governance includes the Board of Governors and Executive Board. The IMF's role has evolved over time in response to changes like the collapse of the Bretton Woods system in the 1970s.
The document discusses key components of the international financial system including money, banking institutions, financial instruments, financial markets, and central banks. It defines the international financial system as comprising all global financial institutions, borrowers, lenders, and regulators that facilitate the transfer of funds internationally. Key differences between the international monetary system and international financial system are also outlined.
The document defines and describes key components of a financial system. It explains that a financial system consists of financial institutions and markets that facilitate the transfer of funds between entities with excess capital and those with deficits. It outlines the main participants in financial systems as households, companies, governments, and foreigners. It also describes various financial intermediaries like banks, investment funds, pension funds, and insurance companies. Finally, it provides examples of different types of financial markets and securities.
The Federal Reserve uses three main tools of monetary policy: open market operations, the reserve ratio, and the discount rate. Open market operations, where the Fed buys and sells Treasury securities, is the most important as it allows the Fed to flexibly manipulate bank reserves and money supply. Changing the reserve ratio is rarely used due to its powerful impact. The discount rate has little direct effect on money supply. By expanding or reducing bank reserves through open market operations, the Fed implements expansionary or contractionary monetary policy.
An introduction to Da AFghanistan bank and its monetary policy By Taj Mohamma...Taj Mohammad Tamkeen
油
The document outlines the history, current structure, and functions of the Da Afghanistan Bank (DAB), which was established to foster price stability and support a robust financial system in Afghanistan. It describes the DAB's responsibilities, including formulating monetary policy, managing foreign exchange reserves, and supervising financial institutions. Additionally, it discusses the importance of price stability for economic growth and the monetary policy instruments used by the DAB to manage the money supply.
The Federal Reserve System is the central banking system of the United States. It was established in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve System has a decentralized structure, with the Board of Governors setting monetary policy, 12 regional Federal Reserve Banks carrying out operations, and commercial banks holding stock in the regional banks. The Federal Reserve serves as the nation's central bank, regulating the money supply and overseeing the banking system to promote financial stability and moderate long-term growth.
The document discusses the role of the International Monetary Fund (IMF) in global monetary systems. It describes how the IMF was established in 1944 in response to the Great Depression to stabilize currency exchange rates without relying on the gold standard. The IMF monitors member country policies and economies to promote cooperation and avoid future crises. It also works to maintain orderly exchange rates and policies, and stabilize capital flows during financial issues. The IMF thus aims to create a stable global monetary system resilient to economic fluctuations.
The document discusses the history and structure of the international financial system and the International Monetary Fund (IMF). It outlines the key elements and periods in the evolution of the international financial system, including the gold standard, Bretton Woods system, and floating exchange rates. It then provides details on the IMF, including its objectives, functions, structure, operations, facilities, special drawing rights, and role in developing countries as well as some shortcomings. The IMF aims to promote global monetary cooperation and financial stability between its 188 member countries.
The document discusses the structures and trends within the American and Japanese capital markets, highlighting the impact of global financial conditions and foreign investments. It outlines key components such as financial regulations, capital market structures, market indexes, and the evolution of both markets over time. Additionally, it compares the existing differences between the U.S. and Japanese capital markets, focusing on areas such as investment flows, regulatory environments, and market depth.
The document discusses the financial system in India. It defines the financial system as comprising financial markets, instruments, and intermediation. It describes the key components of the Indian financial system including money markets, capital markets, forex markets, and credit markets. It outlines the role of the financial system in facilitating flow of funds from surplus to deficit units and promoting savings and investment. It also provides an overview of the development of the financial system in India and current challenges.
Chapter 07_Central Banking and the Conduct of Monetary PolicyRusman Mukhlis
油
The document discusses the structure and operations of central banks, focusing on the U.S. Federal Reserve System. It describes the origins of the Fed following financial panics in the 19th century. The structure of the Fed involves 12 regional banks, a Board of Governors, and the Federal Open Market Committee. Central bank independence and its relationship to macroeconomic performance is also examined.
The Special Drawing Rights (SDR) is an international reserve asset created by the IMF to supplement its member countries' official reserves. SDRs represent a potential claim on the currencies of IMF members. Each SDR is valued based on a basket of currencies, consisting of 44% U.S. dollar, 34% euro, 11% Japanese yen, and 11% British pound sterling. SDRs can be exchanged between IMF members and used to pay obligations to the IMF, helping supplement foreign exchange reserves.
The document discusses the functions and types of money, including how money serves as a medium of exchange, unit of account, and store of value. It describes the different components that make up the US money supply, such as currency, demand deposits, savings deposits, and money market funds. The document also provides an overview of the Federal Reserve System, including its structure with the Board of Governors and regional Federal Reserve Banks. It explains how the Federal Reserve uses open market operations, reserve requirements, and interest rates to influence the US money supply and achieve its monetary policy goals.
Money serves as a medium of exchange, unit of account, and store of value. The Federal Reserve regulates the US monetary system and controls the money supply through open market operations and by adjusting reserve requirements and interest rates. Banks increase the money supply by lending out deposits, though the Fed has imperfect control as it cannot dictate lending or deposit amounts.
The document discusses the different types of financial markets including capital markets, commodity markets, money markets, derivatives markets, insurance markets, foreign exchange markets, and government securities markets. It provides details on the key segments within capital markets such as stock markets and bond markets. It also discusses the regulatory bodies that govern the different financial markets in India.
The document discusses key elements of international financial systems including:
1) It defines international finance and discusses topics like exchange rates and foreign direct investment.
2) The global financial system consists of institutions that operate internationally, as opposed to nationally or regionally, and includes organizations like the IMF and central banks.
3) Core elements of any financial system include money, banking institutions, financial markets, instruments, and services.
The document provides information about Special Drawing Rights (SDRs) created by the International Monetary Fund. It discusses that SDRs were created in 1969 as a supplemental international reserve asset intended to supplement a shortfall of gold and US dollars. The value of an SDR is defined by a weighted basket of currencies including the US dollar, Euro, British pound, and Japanese yen. SDRs are allocated to IMF members based on their IMF quota and can only be exchanged between central banks for freely usable currencies.
International Financial Market & International Monetary System Itmamul Akwan
油
The document discusses international financial management and markets, emphasizing the mechanisms for fund transfer between lenders and borrowers across national borders, and the roles of various financial institutions. It outlines key functions of financial markets, including capital raising, price determination, risk sharing, and the facilitation of international transactions, as well as categorizing different segments of financial markets. Additionally, it defines the international monetary system and its features, stages, and implications for managers in navigating currency volatility and influencing government policies.
The document discusses Special Drawing Rights (SDRs), which were created by the IMF in 1969 as a supplementary international reserve asset to help address shortfalls in preferred reserve assets like gold and the US dollar. SDRs are neither a currency nor a claim on the IMF, but are instead exchangeable for currencies from IMF member countries. The value of an SDR is determined by a basket of currencies and SDRs can be used between countries to supplement foreign exchange reserves. SDRs have played a role as an alternative reserve asset during periods of US dollar weakness or lack of liquidity.
The document provides a comprehensive overview of financial systems, detailing their meaning, components, and functions, including financial institutions, markets, instruments, and services. It categorizes financial institutions into depository, contractual, and investment types, and explains the significance of financial markets in resource transfer and economic growth. Additionally, it outlines the classifications of financial markets, such as capital and money markets, and highlights the roles of various participants and instruments within these systems.
Special Drawing Rights (SDRs) are an IMF monetary unit created in 1969, defined as a weighted average of four major currencies and recalculated every five years. SDRs serve as an accounting unit and aim to replace gold and silver in international transactions, offering benefits such as stability and reduced risk for lending countries. However, they also face criticisms regarding liquidity, limited currency representation, and associated geopolitical risks.
Special drawing rights (SDR) and Optimum currency area (OCA)Piyush Patidar
油
This document discusses Special Drawing Rights (SDR) and Optimum Currency Areas (OCA). It defines SDR as an international reserve asset created by the IMF in 1969 used for balance of payments settlements. It explains that SDR was created to support the Bretton Woods system and is now valued as a basket of currencies. The document also outlines OCA theory and criteria for an optimal currency region, noting regions with openness, diverse production, mobile labor and homogeneous preferences are more suited for a single currency. It concludes benefits of an OCA include reduced costs and increased trade while costs include constrained monetary and fiscal policies.
The IMF was conceived at the 1944 Bretton Woods conference to establish a framework for postwar economic cooperation and avoid competitive currency devaluations that worsened the Great Depression. The IMF formally began in 1945 with 29 members and its first loan was to France in 1947. The IMF's purpose is to ensure stability of the international monetary system and promote sustainable economic growth. It provides loans, technical assistance, policy advice and surveillance to its 188 member countries. The IMF's governance includes the Board of Governors and Executive Board. The IMF's role has evolved over time in response to changes like the collapse of the Bretton Woods system in the 1970s.
The document discusses key components of the international financial system including money, banking institutions, financial instruments, financial markets, and central banks. It defines the international financial system as comprising all global financial institutions, borrowers, lenders, and regulators that facilitate the transfer of funds internationally. Key differences between the international monetary system and international financial system are also outlined.
The document defines and describes key components of a financial system. It explains that a financial system consists of financial institutions and markets that facilitate the transfer of funds between entities with excess capital and those with deficits. It outlines the main participants in financial systems as households, companies, governments, and foreigners. It also describes various financial intermediaries like banks, investment funds, pension funds, and insurance companies. Finally, it provides examples of different types of financial markets and securities.
The Federal Reserve uses three main tools of monetary policy: open market operations, the reserve ratio, and the discount rate. Open market operations, where the Fed buys and sells Treasury securities, is the most important as it allows the Fed to flexibly manipulate bank reserves and money supply. Changing the reserve ratio is rarely used due to its powerful impact. The discount rate has little direct effect on money supply. By expanding or reducing bank reserves through open market operations, the Fed implements expansionary or contractionary monetary policy.
An introduction to Da AFghanistan bank and its monetary policy By Taj Mohamma...Taj Mohammad Tamkeen
油
The document outlines the history, current structure, and functions of the Da Afghanistan Bank (DAB), which was established to foster price stability and support a robust financial system in Afghanistan. It describes the DAB's responsibilities, including formulating monetary policy, managing foreign exchange reserves, and supervising financial institutions. Additionally, it discusses the importance of price stability for economic growth and the monetary policy instruments used by the DAB to manage the money supply.
The Federal Reserve System is the central banking system of the United States. It was established in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserve System has a decentralized structure, with the Board of Governors setting monetary policy, 12 regional Federal Reserve Banks carrying out operations, and commercial banks holding stock in the regional banks. The Federal Reserve serves as the nation's central bank, regulating the money supply and overseeing the banking system to promote financial stability and moderate long-term growth.
The document discusses the role of the International Monetary Fund (IMF) in global monetary systems. It describes how the IMF was established in 1944 in response to the Great Depression to stabilize currency exchange rates without relying on the gold standard. The IMF monitors member country policies and economies to promote cooperation and avoid future crises. It also works to maintain orderly exchange rates and policies, and stabilize capital flows during financial issues. The IMF thus aims to create a stable global monetary system resilient to economic fluctuations.
The document discusses the history and structure of the international financial system and the International Monetary Fund (IMF). It outlines the key elements and periods in the evolution of the international financial system, including the gold standard, Bretton Woods system, and floating exchange rates. It then provides details on the IMF, including its objectives, functions, structure, operations, facilities, special drawing rights, and role in developing countries as well as some shortcomings. The IMF aims to promote global monetary cooperation and financial stability between its 188 member countries.
The document discusses the structures and trends within the American and Japanese capital markets, highlighting the impact of global financial conditions and foreign investments. It outlines key components such as financial regulations, capital market structures, market indexes, and the evolution of both markets over time. Additionally, it compares the existing differences between the U.S. and Japanese capital markets, focusing on areas such as investment flows, regulatory environments, and market depth.
The document discusses the financial system in India. It defines the financial system as comprising financial markets, instruments, and intermediation. It describes the key components of the Indian financial system including money markets, capital markets, forex markets, and credit markets. It outlines the role of the financial system in facilitating flow of funds from surplus to deficit units and promoting savings and investment. It also provides an overview of the development of the financial system in India and current challenges.
Chapter 07_Central Banking and the Conduct of Monetary PolicyRusman Mukhlis
油
The document discusses the structure and operations of central banks, focusing on the U.S. Federal Reserve System. It describes the origins of the Fed following financial panics in the 19th century. The structure of the Fed involves 12 regional banks, a Board of Governors, and the Federal Open Market Committee. Central bank independence and its relationship to macroeconomic performance is also examined.
The Special Drawing Rights (SDR) is an international reserve asset created by the IMF to supplement its member countries' official reserves. SDRs represent a potential claim on the currencies of IMF members. Each SDR is valued based on a basket of currencies, consisting of 44% U.S. dollar, 34% euro, 11% Japanese yen, and 11% British pound sterling. SDRs can be exchanged between IMF members and used to pay obligations to the IMF, helping supplement foreign exchange reserves.
The document discusses the functions and types of money, including how money serves as a medium of exchange, unit of account, and store of value. It describes the different components that make up the US money supply, such as currency, demand deposits, savings deposits, and money market funds. The document also provides an overview of the Federal Reserve System, including its structure with the Board of Governors and regional Federal Reserve Banks. It explains how the Federal Reserve uses open market operations, reserve requirements, and interest rates to influence the US money supply and achieve its monetary policy goals.
Money serves as a medium of exchange, unit of account, and store of value. The Federal Reserve regulates the US monetary system and controls the money supply through open market operations and by adjusting reserve requirements and interest rates. Banks increase the money supply by lending out deposits, though the Fed has imperfect control as it cannot dictate lending or deposit amounts.
This document provides an overview of currency and the monetary system in the United States. It discusses the functions and characteristics of money, the development of the banking system and currency over time, and the creation of the Federal Reserve System in 1914 to serve as the central bank and oversee monetary policy. Key topics covered include the gold standard, the money multiplier effect of fractional-reserve banking, and the Federal Reserve's tools of conducting open market operations and setting reserve requirements and interest rates to influence the money supply.
The document discusses money and the monetary system. It defines money and its key functions as a medium of exchange, unit of account, and store of value. It describes the Federal Reserve as the central bank that regulates the US monetary system and controls the money supply through tools like open market operations, reserve requirements, and interest rates. When banks make loans from their deposits, this increases the money supply through fractional-reserve banking and the money multiplier effect. However, the Fed's control over the money supply is imperfect as it cannot directly control lending or deposit amounts.
The document discusses the history and role of the Federal Reserve in controlling the US money supply through various monetary policy tools. It explains how the Federal Reserve can directly control the monetary base and influence broader monetary aggregates. By purchasing or selling Treasury securities, the Federal Reserve can adjust bank reserves and influence interest rates, inflation, output, and employment.
The document discusses the monetary system, including the meaning and functions of money, different types of money, and measures of the money stock. It also describes the organization and functions of the US Federal Reserve System, the central bank of the United States, including its role in regulating banks and controlling the money supply through open market operations and the Federal Open Market Committee.
The Federal Reserve System is the central banking system of the United States. It was established in 1913 and consists of regional Federal Reserve Banks, numerous commercial bank members, and a Board of Governors. The System serves to regulate the money supply and banking system, acting as a lender of last resort to banks. It also serves as the government's bank, handling Treasury transactions and auctions. Monetary policy is set by the Federal Open Market Committee, which includes the Board of Governors and Federal Reserve Bank presidents.
The document provides an overview of key concepts related to money and the Federal Reserve System. It defines money as anything that serves as a medium of exchange, unit of account, and store of value. It also discusses the functions and properties of money, different types of money including commodity and fiat money, and definitions of the money supply including M1, M2, and M3. Additionally, the summary explains the role of the Federal Reserve System in controlling the money supply and supervising banks, as well as other organizations like the FDIC that insure bank deposits.
The document provides an overview of money and banking concepts including the functions of money, types of money, and properties of money. It also summarizes the role of the Federal Reserve in regulating the US money supply through tools like open market operations, changing reserve requirements, and adjusting interest rates. The Federal Reserve aims to promote price stability and maximum employment through its monetary policy decisions.
The document discusses the functions of money, different definitions of money supply (M1, M2, M3), the Federal Reserve System and its role in conducting monetary policy. It explains that the Fed uses tools like open market operations, reserve requirements, and the discount rate to influence the money supply and interest rates. By increasing or decreasing the money supply and interest rates, the Fed can impact aggregate demand and the overall economy.
The document discusses several topics related to money and economics:
1. It defines money and describes its main functions as a medium of exchange, store of value, and standard of value. Throughout history, various commodities have served as money.
2. Modern fiat money is no longer backed by gold or silver but is accepted due to trust in governments. The money supply includes currency as well as checkable deposits and other liquid assets.
3. Banks play a key role in money creation through fractional reserve banking by lending out deposits. The Federal Reserve influences monetary policy through tools like open market operations and interest rates.
The document discusses the monetary system and the role of money. It describes money as having three main functions: as a medium of exchange, a unit of account, and a store of value. It then discusses the US monetary system, the role of the Federal Reserve in regulating banks and money supply through open market operations and setting reserve requirements. Banks can expand the money supply through fractional-reserve banking and the money multiplier formula is used to calculate total money creation.
The three main functions of money are as a medium of exchange, a unit of account, and as a store of value. Money must have six key characteristics - it must be durable, portable, divisible, stable in value, scarce, and universally accepted. The Federal Reserve, or the Fed, acts as the central bank of the United States and oversees the banking system and regulates the money supply. It performs governmental banking functions and uses tools like open market operations and interest rates to implement monetary policy and control inflation.
The FED and its influence on Money and CreditCha Almaida
油
The Federal Reserve System is the central bank of the United States. It was created in 1913 to provide a safer and more stable monetary and financial system. The Fed has several key functions including conducting monetary policy, promoting financial stability, and overseeing banks. It uses various tools like open market operations, adjusting reserve requirements and interest rates to influence the money supply and achieve its goals of maximum employment, stable prices and moderate long-term interest rates.
The Federal Reserve (Fed) is the central bank of the United States whose responsibilities include managing monetary policy. The Fed uses three main tools to implement monetary policy - open market operations, reserve requirements, and the discount rate. Through open market operations, the Fed buys and sells government securities to influence the money supply. To stimulate the economy during difficult times, the Fed would expand the money supply by buying securities. Conversely, selling securities would contract the money supply. The Fed also uses reserve requirements and the discount rate to influence interest rates and the money supply in pursuit of either easy or tight monetary policy.
The Federal Reserve (Fed) is the central bank of the United States and uses monetary policy to influence interest rates and the money supply. The Fed has three main tools: open market operations, reserve requirements, and the discount rate. Through open market operations, the Fed buys and sells government bonds to influence bond prices and interest rates. Lowering the reserve requirement or discount rate makes it easier for banks to lend, expanding the money supply. Raising them has the opposite tightening effect. The Fed aims to balance economic growth and inflation by loosening or tightening monetary policy as needed.
The document summarizes key concepts about money, the money supply, and monetary policy in the United States. It explains that the US dollar is issued by the Federal Reserve and backed by the US government. It describes how the Federal Reserve, made up of the Board of Governors and regional banks, implements monetary policy to control interest rates through managing the money supply. It also outlines how money serves important functions as a medium of exchange, unit of account, and store of value in the US economy.
The document provides an overview of Chapter 20 which covers money, financial institutions, and the Federal Reserve. It includes 7 learning goals that cover what money is, how the Federal Reserve controls the money supply, the history of banking and the Federal Reserve system, the various institutions in the US banking system, protecting deposits during crises, technological advancements in banking, and international banking organizations.
Eco system of body wich are indroduce leval of cell.pptnoyancollection
油
The Federal Reserve System, established in 1913, serves as the central bank of the United States, managing monetary policy to ensure economic stability. It influences the money supply primarily through open market operations, the discount rate, and reserve requirements, impacting employment and inflation. The Federal Open Market Committee, composed of board members and bank presidents, makes key decisions on buying and selling government securities.
The Federal Reserve system was established in 1913 to serve as the central bank of the United States. It aims to ensure price stability and moderate long-term interest rates. The Fed is composed of the Board of Governors, 12 regional Federal Reserve Banks, and the Federal Open Market Committee. The FOMC sets monetary policy by adjusting interest rates and the money supply through open market operations. The Fed oversees banking institutions, maintains the stability of the financial system, and provides various central banking services.
2. The Monetary
System
29
Copyright 息 2004 South-Western
3. THE MEANING OF MONEY
Money is the set of assets in an economy that
people regularly use to buy goods and services
from other people.
Copyright 息 2004 South-Western
4. The Functions of Money
Money has three functions in the economy:
Medium of exchange
Unit of account
Store of value
Copyright 息 2004 South-Western
5. The Functions of Money
Medium of Exchange
A medium of exchange is an item that buyers give
to sellers when they want to purchase goods and
services.
A medium of exchange is anything that is readily
acceptable as payment.
Copyright 息 2004 South-Western
6. The Functions of Money
Unit of Account
A unit of account is the yardstick people use to post
prices and record debts.
Store of Value
A store of value is an item that people can use to
transfer purchasing power from the present to the
future.
Copyright 息 2004 South-Western
7. The Functions of Money
Liquidity
Liquidity is the ease with which an asset can be
converted into the economys medium of exchange.
Copyright 息 2004 South-Western
8. The Kinds of Money
Commodity money takes the form of a
commodity with intrinsic value.
Examples: Gold, silver, cigarettes.
Fiat money is used as money because of
government decree.
It does not have intrinsic value.
Examples: Coins, currency, check deposits.
Copyright 息 2004 South-Western
9. Money in the U.S. Economy
Currency is the paper bills and coins in the
hands of the public.
Demand deposits are balances in bank accounts
that depositors can access on demand by
writing a check.
Copyright 息 2004 South-Western
10. Figure 1 Money in the U.S. Economy
Billions
of Dollars
M2
$5,455
Savings deposits
Small time deposits
Money market
mutual funds
A few minor categories
($4,276 billion)
M1
$1,179
Demand deposits
Everything in M1
Travelers checks
($1,179 billion)
Other checkable deposits
($599 billion)
Currency
($580 billion)
0
Copyright息2003 Southwestern/Thomson Learning
11. CASE STUDY: Where Is All The Currency?
In 2001 there was about $580 billion of U.S.
currency outstanding.
That is $2,734 in currency per adult.
Who is holding all this currency?
Currency held abroad
Currency held by illegal entities
Copyright 息 2004 South-Western
12. THE FEDERAL RESERVE
SYSTEM
The Federal Reserve (Fed) serves as the
nations central bank.
It is designed to oversee the banking system.
It regulates the quantity of money in the economy.
Copyright 息 2004 South-Western
13. THE FEDERAL RESERVE
SYSTEM
The Fed was created in 1914 after a series of
bank failures convinced Congress that the
United States needed a central bank to ensure
the health of the nations banking system.
Copyright 息 2004 South-Western
14. THE FEDERAL RESERVE
SYSTEM
The Structure of the Federal Reserve System:
The primary elements in the Federal Reserve
System are:
1) The Board of Governors
2) The Regional Federal Reserve Banks
3) The Federal Open Market Committee
Copyright 息 2004 South-Western
15. The Feds Organization
The Fed is run by a Board of Governors, which
has seven members appointed by the president
and confirmed by the Senate.
Among the seven members, the most important
is the chairman.
The chairman directs the Fed staff, presides over
board meetings, and testifies about Fed policy in
front of Congressional Committees.
Copyright 息 2004 South-Western
16. The Feds Organization
The Board of Governors
Seven members
Appointed by the president
Confirmed by the Senate
Serve staggered 14-year terms so that one comes
vacant every two years.
President appoints a member as chairman to serve a
four-year term.
Copyright 息 2004 South-Western
17. The Feds Organization
The Federal Reserve System is made up of the
Federal Reserve Board in Washington, D.C.,
and twelve regional Federal Reserve Banks.
Copyright 息 2004 South-Western
18. The Feds Organization
The Federal Reserve Banks
Twelve district banks
Nine directors
Three appointed by the Board of Governors.
Six are elected by the commercial banks in the district.
The directors appoint the district president, which is
approved by the Board of Governors.
Copyright 息 2004 South-Western
20. The Feds Organization
The Federal Reserve Banks
The New York Fed implements some of the Feds
most important policy decisions.
Copyright 息 2004 South-Western
21. The Feds Organization
The Federal Open Market Committee (FOMC)
Serves as the main policy-making organ of the
Federal Reserve System.
Meets approximately every six weeks to review the
economy.
Copyright 息 2004 South-Western
22. The Feds Organization
The Federal Open Market Committee (FOMC)
is made up of the following voting members:
The chairman and the other six members of the
Board of Governors.
The president of the Federal Reserve Bank of New
York.
The presidents of the other regional Federal Reserve
banks (four vote on a yearly rotating basis).
Copyright 息 2004 South-Western
23. The Feds Organization
Monetary policy is conducted by the Federal
Open Market Committee.
Monetary policy is the setting of the money supply
by policymakers in the central bank
The money supply refers to the quantity of money
available in the economy.
Copyright 息 2004 South-Western
24. The Federal Open Market Committee
Three Primary Functions of the Fed
Regulates banks to ensure they follow federal laws
intended to promote safe and sound banking
practices.
Acts as a bankers bank, making loans to banks and
as a lender of last resort.
Conducts monetary policy by controlling the money
supply.
Copyright 息 2004 South-Western
25. The Federal Open Market Committee
Open-Market Operations
The money supply is the quantity of money
available in the economy.
The primary way in which the Fed changes the
money supply is through open-market operations.
The Fed purchases and sells U.S. government bonds.
Copyright 息 2004 South-Western
26. The Federal Open Market Committee
Open-Market Operations
To increase the money supply, the Fed buys
government bonds from the public.
To decrease the money supply, the Fed sells
government bonds to the public.
Copyright 息 2004 South-Western
27. BANKS AND THE MONEY
SUPPLY
Banks can influence the quantity of demand
deposits in the economy and the money supply.
Copyright 息 2004 South-Western
28. BANKS AND THE MONEY
SUPPLY
Reserves are deposits that banks have received
but have not loaned out.
In a fractional-reserve banking system, banks
hold a fraction of the money deposited as
reserves and lend out the rest.
Copyright 息 2004 South-Western
29. BANKS AND THE MONEY
SUPPLY
Reserve Ratio
The reserve ratio is the fraction of deposits that
banks hold as reserves.
Copyright 息 2004 South-Western
30. Money Creation with Fractional-Reserve
Banking
When a bank makes a loan from its reserves, the
money supply increases.
The money supply is affected by the amount
deposited in banks and the amount that banks loan.
Deposits into a bank are recorded as both assets and
liabilities.
The fraction of total deposits that a bank has to keep as
reserves is called the reserve ratio.
Loans become an asset to the bank.
Copyright 息 2004 South-Western
31. Money Creation with Fractional-Reserve
Banking
This T-Account shows a bank that
accepts deposits, First National Bank
keeps a portion Assets Liabilities
as reserves,
and lends out Reserves Deposits
the rest. $10.00 $100.00
It assumes a Loans
reserve ratio $90.00
of 10%.
Total Assets Total Liabilities
$100.00 $100.00
Copyright 息 2004 South-Western
32. Money Creation with Fractional-Reserve
Banking
When one bank loans money, that money is
generally deposited into another bank.
This creates more deposits and more reserves to
be lent out.
When a bank makes a loan from its reserves,
the money supply increases.
Copyright 息 2004 South-Western
33. The Money Multiplier
How much money is eventually created in this
economy?
Copyright 息 2004 South-Western
34. The Money Multiplier
The money multiplier is the amount of money
the banking system generates with each dollar
of reserves.
Copyright 息 2004 South-Western
35. The Money Multiplier
First National Bank Second National Bank
Assets Liabilities Assets Liabilities
Reserves Deposits Reserves Deposits
$10.00 $100.00 $9.00 $90.00
Loans Loans
$90.00 $81.00
Total Assets Total Liabilities Total Assets Total Liabilities
$100.00 $100.00 $90.00 $90.00
Money Supply = $190.00!
Copyright 息 2004 South-Western
36. The Money Multiplier
The money multiplier is the reciprocal of the
reserve ratio:
M = 1/R
With a reserve requirement, R = 20% or 1/5,
The multiplier is 5.
Copyright 息 2004 South-Western
37. The Feds Tools of Monetary Control
The Fed has three tools in its monetary toolbox:
Open-market operations
Changing the reserve requirement
Changing the discount rate
Copyright 息 2004 South-Western
38. The Feds Tools of Monetary Control
Open-Market Operations
The Fed conducts open-market operations when it
buys government bonds from or sells government
bonds to the public:
When the Fed buys government bonds, the money supply
increases.
The money supply decreases when the Fed sells
government bonds.
Copyright 息 2004 South-Western
39. The Feds Tools of Monetary Control
Reserve Requirements
The Fed also influences the money supply with
reserve requirements.
Reserve requirements are regulations on the
minimum amount of reserves that banks must hold
against deposits.
Copyright 息 2004 South-Western
40. The Feds Tools of Monetary Control
Changing the Reserve Requirement
The reserve requirement is the amount (%) of a
banks total reserves that may not be loaned out.
Increasing the reserve requirement decreases the money
supply.
Decreasing the reserve requirement increases the money
supply.
Copyright 息 2004 South-Western
41. The Feds Tools of Monetary Control
Changing the Discount Rate
The discount rate is the interest rate the Fed charges
banks for loans.
Increasing the discount rate decreases the money supply.
Decreasing the discount rate increases the money supply.
Copyright 息 2004 South-Western
42. Problems in Controlling the Money Supply
The Feds control of the money supply is not
precise.
The Fed must wrestle with two problems that
arise due to fractional-reserve banking.
The Fed does not control the amount of money that
households choose to hold as deposits in banks.
The Fed does not control the amount of money that
bankers choose to lend.
Copyright 息 2004 South-Western
43. Summary
The term money refers to assets that people
regularly use to buy goods and services.
Money serves three functions in an economy:
as a medium of exchange, a unit of account,
and a store of value.
Commodity money is money that has intrinsic
value.
Fiat money is money without intrinsic value.
Copyright 息 2004 South-Western
44. Summary
The Federal Reserve, the central bank of the
United States, regulates the U.S. monetary
system.
It controls the money supply through open-
market operations or by changing reserve
requirements or the discount rate.
Copyright 息 2004 South-Western
45. Summary
When banks loan out their deposits, they
increase the quantity of money in the economy.
Because the Fed cannot control the amount
bankers choose to lend or the amount
households choose to deposit in banks, the
Feds control of the money supply is imperfect.
Copyright 息 2004 South-Western
