Teaching the New Tools of Monetary Policy
Resources for teaching the Fed's monetary policy tools in an ample-reserves framework.
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In this video assignment, discover how the Fed affects your life by reviewing the three key functions of a central bank and how the Fed impacts the economy.
So, do you remember the three major functions of the Federal Reserve? Sure. The payments system, supervision and regulation and monetary policy. The Fed isn't directly in charge of every aspect of the nation's payment system, but it's a big provider of payment services, and it helps ensure that payments are made safely and smoothly. Payment systems are what enables money to move from one party to another. Safe, secure efficient payment system is vital to the functioning of our economy. As for supervision and regulation, for the thousands of financial institutions it has authority over, the Fed makes sure they stay healthy and sees that they conform to rules and regulations. So, we clearly have to have in our sights just the trade-off between too much regulation that would stifle the economic activity and too much risk taking that would jeopardize the financial stability or the safety and soundness of the financial system or any institution. By influencing interest rates throughout the economy, the Fed's monetary policy works to achieve its goals of price stability and maximum employment. Monetary policy making can be very challenging. I think about it as a quarterback who throws the ball not directly at the running receiver but ahead of the receiver. In the same way, when we make monetary policy, we don't want to just think about where the economy is today,
but what we think it's going to be when those policies begin to have their full influence. There have been banks in the United States since the country was new, but the Federal Reserve has only been around since 1913. There will always be times of prosperity and times of recession of course, but the Fed is essential to keeping our economy running as smoothly as it does. The Fed's aim is to make the times of prosperity as long as possible, while making sure the times of recession, when they do come, are as short as possible. And remember, because you are a part of the economy, the Federal Reserve affects your life.
Teaching the New Tools of Monetary Policy
Resources for teaching the Fed's monetary policy tools in an ample-reserves framework.
The Fed's New Monetary Policy Tools
Explore the new monetary policy tools of the Fed.
Price Stability
Learn about price stability and how it is measured.
What Happens When the Federal Reserve Raises Interest Rates?
Demonstrate how a change in the target range for the federal funds rate transmits through the economy.
Econ Lowdown Podcast Series
21 Economics audio assignments for your classroom
How Does the Fed Use Its Monetary Policy Tools to Influence the Economy?
Read how the FOMC conducts monetary policy by setting the target range for the federal funds rate.
Boom Times and Bubbles: The Internet Age
Learn about the Monetary Control Act of 1980.
Central Banking
Learn the basics parts a central bank.
Creation of the Federal Reserve
Learn about banking panics, recessions, and depressions in the U.S. during the 1800s.
Inflation Fed and You
Learn what causes inflation.
Inflation, Deflation, and Disinflation
Learn the differences between inflation, deflation, and disinflation.
Introduction to the Federal Reserve
Introduce the Fed’s three main functions.
Monetary Policy Fed and You
See how the Fed conducts monetary policy.
Money Versus Barter
Learn how money solves problems created by barter systems.
Price Stability
Learn the importance of price stability.
Stagflation in the 1970s
How did Federal Reserve Chairman Paul Volcker contain inflation, spurred economic growth, and reduced unemployment?
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