Transcript Chapter 13 Money & Banking

Monetary Policy
1. Discount Rate
2. Reserve Ratio
3. Bonds
Ben Bernanke
There is $800 billion in currency [notes & coins].
[2/3 is overseas]
Money = paper notes + coins + Demand Deposits
[52%]
[2%]
[46%]
“Anything you can buy
a candy bar with”
1. Three functions (roles) of money
a. medium of exchange b. unit of account
2. What constitutes money in our economy?
a. Currency (paper dollars-52%)
(coins-2%)
b. DD-46%
3. What “backs” the money supply?
(gold/silver/the faith of the “G”)
c. store of value
.
“Faith” of the “G”
4. Explanation of the demand for money.
Dt + Da = DM
5. The four-part make-up of the Federal Reserve
a. Board of Governors b. FOMC c. 12 Fed Banks d. Member banks
Money – any good widely accepted for goods
and services or repayment of debt.
Money is anything generally acceptable as a medium of exchange.
Paper notes printed at:
1. FW Currency Center
2. Washington D.C.
Coins minted at:
1. Denver
2. Philadelphia
3. San Francisco
1st-A-Boston (0)
2nd-B-New York (1)
3rd-C-Philadelphia (0)
4th-D-Cleveland (2)
5th-E-Richmond (2)
6th-F-Atlanta (5)
7th-G-Chicago (1)
8th-H-St. Louis (3)
9th-I-Minneapolis (1)
10th-J-Kansas City (3)
11th-K-Dallas (3)
12th-L-San Francisco (4)
Bills are crowded with numbers and
letters that help the U.S. Treasury track
printing errors & authenticate currency.
Here’s what many of them mean:
Fed bank
that issued
the bill
[Chicago]
Last letter tells how many
times serial number has run
Number corresponds to letter in
First letter corresponds
circle indicating issuing Fed bank.
to issuing Fed bank
New $20 colors are peach, blue, and green.
[Jackson’s portrait is larger, free from the oval]
New background
colors add an
extra layer of
complexity for
counterfeiters
Ink appears either
copper or green,
depending upon
the angle at which
the bill is viewed.
This is the 20’s 20th new look.
The $20 bill is the
most counterfeited
The first $20 bill The average $20 bill lasts 3 years.
in the U. S., while
was introduced in
There are 5 billion twenties in circulation,
the $100 is most
1861. Back then,
enough to circle the earth 19 times. counterfeited abroad.
$20 was about the
An ATM can hold up to 7,500 bills,
monthly wage for
or $150,000 in twenties.
manual laborers.
$100 Dollar Bill –
Red Polymer Thread
$50 – Yellow
$20 – Green
$10 – Orange
Now the “5” screams, “I
am a 5.”
$5 - Blue
[They were not going to change the $5 note but –
counterfeiters were bleaching Abe & printing Ben on
them as they had similar security features. It has
2 new water marks and purple ink. [no oval]
No paper notes larger than $100 have been printed since 1946.
There will be another new $100 bill in late 2008. It will combine
micro-printing with tiny lenses – 650,000 for a single bill. The lenses
magnify the micro-printing in a remarkable way.
Move the bill side to side, and the image appears to move up & down.
Move the bill up and down, and the image appears to move from side
to side. It is a very complex optical structure on a microscopic scale.
The government prints 38 million notes each business day with a face
value of $750 million. [70% of the $800 million currency is $100 bills.]
And – what about the new
“Bush Dollar” coming out next week?
And the new $1 bill coming out Wednesday?
This phony Bush
$200 bill showed
up at a Kentucky
Dairy Queen.
The serial #:
DUBYA402001
Ronald Reagan
signed it as
Sec. of Treasury
A man bought a
$2 sundae & got
198.00 in real cash
On some of the
signs were these:
“We like broccoli.”
“We like ice cream.”
“U.S.A. deserves
a tax cut.”
Beaver skins [1600’s-1800] were
traded to the Indians for wampum
[clamshells].
Tobacco Leaves became legal tender in 1642.
Cut nails were used as change.
100 nails were worth 10 pence.
Pine Tree Shilling [1642-1684] became
the first minted American coin.
Spanish milled dollar was the
main coin of the 1770’s.
[“Piece of Eight”]
An average colonial worker earned two bits a week.
Many of you already understand the history of money.
Your parents give you money and – it becomes “history”.
Wildcat Banking 1790-1860
Over 3,000
banks issued
10,000 bills
but 5,000 were
counterfeit.
Because some banks were more sound than others, a $5 note at one
rarely had the same purchasing power as a $5 note at another.
State banks issued paper notes in denominations from $1 to $13.
They lost their value the farther away you were, thus the name,
“wildcat banking”, only a wildcat could get back to a distant
bank to verify its authenticity.
“Greenbacks”
This $450 million
brought on severe
inflation.
Civil War Money 1860-1865
Both the Union & the Confederacy paid troops with notes. In 1861,
the nation issued Greenbacks [1st paper money issued by the federal
G]. These $5’s, $10’s, & $20’s[total of $10 M] were redeemable in coins.
In 1862, $450 M in U.S. notes, from $1-$10,000 replaced the
Greenbacks. Because of widespread hoarding of coins, Congress
issued 5, 10, 25, & 50 cent notes. They were called “paper coins” or
“shinplasters.” Northern prices doubled from 1861-1864.
The South issued Confederate notes. Note-holders were to be repaid
in gold & silver after the Civil War. Northerners printed up counterfeit
confederate notes so these notes increased 20-fold from 1861-1865
and inflation increased 9,200%. $2 billion from .50 to $1,000 printed.
Under the gold
standard, $35 of
currency could
be redeemed for
one ounce of
gold.
You could bring
$35 of bills to the
U.S. Treasury and
exchange it for
an ounce of gold.
Gold Certificates (1865-1933) & Silver Certificates (1878-1964)
To increase its reserves of precious metals, the U.S. issued these. The largest was a
$100,000 gold certificate which was not available to the public but was used only among
Fed banks. Silver certificates had denominations from $1 to $1,000.
Federal Reserve Notes (1914-Fed was established in 1913)
Modern coins are produced by mints in Phil., S.F., & Denver. Federal Reserve Notes
make up more than 99.9% of today’s paper currency. Notes of denominations from $5 to
$10,000 circulated until 1946. Since 1946, all notes greater than the $100 were retired.
The $1 note was not introduced until 1963 [previously the $1 silver certificate served as
the $1 bill]. In 1929, all notes were reduced by about 1 inch in length and about ½ inch
in width. $500 million of paper money is shredded each day.
Yap Island is a tiny, U.S. trust territory in the S. Pacific,
500 miles from Guam. It is one of the 4 Federated States of
Micronesia & has 12,000 Yapese & 6,000 “rai” limestone stones.
Barter – goods and services were
traded without the exchange of money.
However, before trade could occur, there had to
be a “double coincidence of wants”. Each trader
had to have something the other wanted.
I’ll trade you a
chicken for a pair
of shoes.
I would love to sell you these
shoes but I can’t eat chicken,
due to my bad teeth, caused by
smoking.
In a barter economy a chicken
farmer who wants to buy shoes
may have to first trade chickens
for apples and then apples for
shoes because the guy selling
shoes wants only apples.
Money eliminates this problem.
You are lucky you are a
pineapple farmer and not a
broccoli farmer. I hate broccoli.
Or, a heart surgeon might accept only
certain goods (like pineapples
)
but not others (
like broccoli)
because he doesn’t like broccoli.
It is less expensive to use money.
The “calculation of exchange” is fast and easy
because whatever the price is, you pay that amount.
Here’s $3.00
for one gallon.
.
The “calculation of exchange” by bartering is
much slower than the “calculation of exchange”
in a monetary system.
• It is less expensive to use money.
• Using money saves time and time is money.
The monetary system enables the “calculation
of exchange” to go much faster.
• Money is also easier to tax.
• So a monetary system is better than a
barter system.
Three FUNCTIONS OF MONEY
1. Medium of Exchange
[any asset that sellers will accept as payment for g/s]
Medium means “something in the middle”, so money is a “medium of trade
between buyers and sellers” because it can be exchanged for something else.
Avoids “double coincidence of wants” that bartering requires.
You would have to have a trading partner who “wants to sell
you goods you want to buy” and “wants to buy
goods you want to sell.”
Liquidity – how easily an asset can be converted into cash
without any additional expense. [Cash has 100% liquidity]
Three FUNCTIONS OF MONEY
$249.00
2. Unit of Account
[measuring the relative value of goods by
stating prices]
Example: Microsoft Stock is selling for $50 a share.
The new Jag is selling for $32,000.
A $2 item is twice as valuable as a $1 item.
Money is like a
yardstick.
People use it to
compare the worth of things that they buy and sell.
Three FUNCTIONS OF MONEY
Greek Coin
2,500 years old
3. Store of Value
[storing wealth from one point in time to another]
[doesn’t wear out easily and holds up to inflation]
Ability of money to hold value over time [Money that lacked durability
or did not hold up well to inflation would not make good money [would not
store value].
Ice cream cones would suffer monetary meltdown, become a
sticky puddle. If money suffers high inflation, it causes the
value of money to “melt.”
Other desirable qualities for money are:
A. Scarcity B. Portability C. Divisible D. Difficult to counterfeit
• Commodity Money:
something that performs
the function of money and has alternative, nonmonetary uses. Gold, silver, cigarettes, corn
Alternative uses
such as …
• Fiat Money:
something that serves as
money but has no other important uses.
– Paper notes
– Coins
Currency + DD equal M1 [Spendable Money]
Also included here would be Travelers checks,
Checklike deposits [NOW and Super NOW Accts]
M1 M2 M3
M1
Completely
Liquid
$1,375
[billions]
2%
52%
46%
M1 + savings deposits, small TDs [like CDs &
bonds] under $100,000, & MMFs for individuals=
M2
M2 + large institutional savings = M3
“V” – how many times a dollar changes hands in a year
V = GDP[Y]/M1 = 13 tr./1.3 tr. = 10
$6,758
$6,934
[Billions]
They are not “plastic money.” They do serve as a:
1. medium of exchange & the
2. credit card statement serves as a unit of account.
3. but, they do not have a store of value.
If the credit card company goes out of business or decides
not to honor your card, it is worthless. They are not money
because they don’t store value.
Debit cards are money. They serve as a:
1. medium of exchange; they also serve as a
2. store of value (not an extension of credit); and
3. debit card statements serve as a unit of account.
Debit Card
Value of Money
Prices
The value of money goes in the opposite direction
of the general price level.
Or, the amount a dollar will buy varies inversely
with the price level.
1. The most important function of money is as a:
(unit of account/store of value/medium of exchange).
2. If you are estimating that it will take $5,000 to escort Suzie Rah
Rah to the prom so that you can demonstrate your
talent with the “Econ Rap,” you are using money as a:
(unit of account/store of value/medium of exchange).
3. If you place some of your Kroger’s earnings in a safety deposit
box so that you can get your boyfriend, Roger Rocket, a pair of
roller blades for Christmas, you are using money as a:
(unit of account/store of value/medium of exchange).
4. Estimating expenses for FSU at $16,001 illustrates money
serving as a (unit of account/store of value/medium of exchange).
5. If Suzie Nomics writes a check for a new Honda, she is using
money as a (unit of account/store of value/medium of exchange).
6. M1 [also called transactions money or medium of exchange money or “spendable money”] is
comprised of coins, paper money and (gold certificates/checkable deposits).
7. The major component of M1 is (currency/checkable deposits).
8. The volume of M1 is closer to ($1/$3/$4) trillion.
9. (M1/M2) includes non-checkable savings accounts, MMA’s & TDs under $100,000.
10. (Fiat/Commodity) money is money because the G says that it is [G fiat].
11. The value of money varies (directly/inversely) with the price level.
12. If the price index increases from 100 to 120, the value of the dollar will
fall by (one third/one fifth/one fourth).
13. The money supply is backed by (silver/gold/the government).
Recession
Lower
Lower
Buy
LRAS
1. Discount Rate – banks borrow from the Fed (symbolic)
2. Required Reserve - % of DD which cannot be loaned.
3. Buy/Sell Bonds – government debt
Inflation
Raise
Raise
- 3 mo., 6 mo., & 1 year; purchase price: $10,000
Sell
AS
AD
- 2 yr., 3 yr., 5 yr.,($5,000), & 10 yr., ($10,000)
AD
AD AS
- 30 years with purchase of $1,000
AD
YR Y*
Prime Rate-loan rate to the best (prime) customers.
Federal Funds Target Rate – overnight lending rate between
banks to correct a temporary imbalance in reserves.
Y*YI
Real GDP 2.3%
4%
17 increases
Nominal Interest Rate
“Students, should the Fed
buy or sell bonds to
jumpstart this economy?”
Jobs are
tough to get.
DI
10
10
8
8
Buy
6
0
AD1
Money Market
AD2 LRAS
[C+Ig+G+Xn]
P2
P1
E1
Investment
Demand
6
DM
Price level
If there is
RECESSION
MS will be
increased.
MS1 MS2
0
QID1 QID2
AS “Easy Money” – (Buy/Sell) bonds,
which (increase/decrease) MS, which
(increase/decrease) interest rates,
which (appreciate/depreciate)
the dollar, which (increase/decrease)
E2 C, Ig, & Xn, which (increase/decrease)
AD & therefore, PL, GDP, & emp.
YR Y*
Real GDP
Nominal Interest Rate
“Now, should I
buy or sell?”
If there is
INFLATION,
MS will be
decreased.
“I’ll get rid of
some money.”
Dm
MS2 MS1
DI
10
10
8
8
6
6
Sell
0
Money Market
LRAS
AS
AD2
P1
Investment
Demand
E1
P2
E2
Y* YI
0
QID2 QID1
“Tight Money” – (Buy/Sell)
bonds, which (incr/decr) the MS,
which (incr/decr) in. rates, which
(apprec/deprec) the dollar,
which (incr/decr) C, Ig, & Xn,
which (incr/decr) AD, PL,& GDP.
AD1
THE Total DEMAND FOR MONEY
Transactions
Demand, Dt
+
Asset
Demand, Da
Nominal Interest Rate
M1
10
7.5
5
2.5
Dt
Independent
of the
interest
rate
Dt
Rate of interest, i (percent)
“Walking around”
money
10
7.5
5
=
Total demand
for money, Dm
Da [M2] – store
of value money
Money that we don’t need for daily, weekly,
or monthly transactions. We will invest more
of it the higher the interest rate. We will hold
less because the opportunity cost increases.
10% Da
Interest Rate
2.5
CDs or
8%
Da
0
0 50 100 150 200 250 300 0 50 100 150 200 250
Amount of money
demanded (billions)
interest, the
higher the I.R.”
Opportunity Cost
0
Amount of money
demanded (billions)
“I’m losing more
Da [hold less]
Interest Rate
Da varies inversely Opportunity Cost
with the interest rate.
Da [hold more]
6%
5%
4%
2%
1%
0
0 50 100 150 200
THE DEMAND FOR MONEY
10
7.5
5
2.5
Dt
0
Rate of interest, i (percent)
Nominal Interest Rate
M
50 100 150 200 250 300
Amount of money
demanded (billions
of dollars)
Asset
Demand, Da
[inverse]
=
10
Total demand
for money, Dm
Rate of interest, i (percent)
+
Transactions
Demand, Dt
[independent]
10
10%
7.5
7.5
7.5%
5
5
5%
2.5
Da
0
2.5%0
50 100 150 200 250 300
Amount of money
demanded (billions
of dollars)
2.5
0
Dm
0 50 100 150 200 250 300
Amount of money
demanded (billions
of dollars)
MS
7.5
5
2.5
Dt
=
Total demand
for money, Dm
MS2 MS1
0 50 100 150 200 250 300
Amount of money
demanded [billions]
Asset
Demand, Da
10
7.5
5
2.5
Da
Rate of interest, i (percent)
10
+
Rate of interest, i (percent)
Nominal Interest Rate
Transactions
Demand, Dt
10
7.5
55
E
2.5
Dm
0
0 50 100 150 200 250 300 0 50 100 150 200 250 300
Amount of money
demanded [billions]
Money market
1. At equilibrium 5% I.R., the amount of money demanded for transactions is
(0/50/100) and the amount demanded as an asset is (0/50/100).
2. If the interest rate were 10%, the amount of money demanded for Dt would
be (0/50/100) & the amount demanded as an asset would be (0/50/100).
3. Da slopes down because lower in. rates (incr/decr) the cost of holding money.
[at “E”, money supplied ($200) = money demanded ($200)]
Nominal Interest Rate
The Dm curve represents the quantity of money
people are willing to hold at various interest rates.
DmMS
7.5
E
5
2.5
0
50
100 150
200
250 300
Money Market
Due to a recession, suppose the money supply
is increased from $200 billion to $250 billion.
S2 S1
P2
P1
# of Bonds
A temporary surplus of
$50 billion beyond which
MS1MS2 the people wish to hold,
10
Nominal Interest Rate
Price of Bonds
[at “E”, money supplied ($200) = money demanded ($200)]
so money becomes a
“hot potato”.
Dm
7.5
E
5
E
2.5
0
50
100
They react by buying
bonds [pushing bond
prices up] to meet the
desired level of liquidity.
150 200 250 300
Money Market
AD AD
PL
YD
GDP
Nominal Interest Rate
LRAS SRAS
MS1 MS2
Dm
E
1%
0
Money Market
500
Liquidity Trap – in a stagnant economy with interest rates near or at zero, an
increase in MS fails to stimulate AD, so recession or depression gets worse.
With low returns expected on financial investments, people hoard their money.
Banks are unwilling to lend in a slack economy. Fiscal policy is needed here.
[at “E”, money supplied ($200) = money demanded ($200)]
Due to inflation, suppose the money supply is
decreased from $200 billion to $150 billion.
Nominal Interest Rate
Dm MS
7.5
E
5
2.5
0
50
100
150 200
Money Market
250 300
P1
P2
# of T-bills
Nominal Interest Rate
Price of Bonds
A temporary shortage of money will require the sale of some
assets [bonds-which will make their price fall] to meet the
money shortage need.
DmMS2 MS1
S1 S2
10
7.5
E
5
0
50
100
150 200
250 300
Money Market
1. [3 pts] Assume that declining stock market prices in the U.S. cause many
U.S. financial investors to sell their stocks and increase their money holdings.
investors sell off stocks when market
prices begin to decline. These new
money holdings will increase the
asset [speculative] demand for money.
In the volatile market, investors will
hold more money while determining
future needs. [2 pts: 1 pt for correct
graph and 1 pt for Dm shifting right.]
Nominal Interest Rate
(a) Draw a correctly labeled graph of the money market and show the
impact of the financial investors’ actions on each of the following.
(i) Demand for money
(ii) Nominal interest rate
DMMS
DM2
Answers for 1. (a) (i) [2 points]
1
r
2
1. (a) (i) In an effort to preserve wealth,
r1
M
Quantity of Money
Tutorial: These will shift the real Dm curve.
1. Changes in real aggregate spending,
2. Advances in banking technology. [ATMs available
24/7 decrease the need for cash (Dm)]
3. Changes in institutions [ability to get interest on
checking accounts lead to an increase in Dm],
4. Riskiness of alternative stores of value [stocks].
Dm increases when stocks are appealing.
Answers for 1. (a) (ii) [1 point for saying the interest rate increases]
1. (a) (ii) The nominal interest rate would increase because the demand
for money increases as the DM curve shifts up, as shown above.
A. Boston
B. New York
C. Philly
D. Cleveland
E. Richland
F. Atlanta
G. Chicago
H. St. Louis
I. Minneapolis
J. Kansas City
K. Dallas
L. San Francisco
th-G-Chicago (1)
7
1st-A-Boston (0)
2nd-B-New York (1) 8th-H-St. Louis (3)
3rd-C-Philadelphia (0) 9th-I-Minneapolis (1)
th-J-Kansas City (3)
th
10
4 -D-Cleveland (2)
5th-E-Richmond (2) 11th-K-Dallas (3)
th-L-San Francisco (4)
th
12
6 -F-Atlanta (5)
The Fed’s 25 Branches
Quasi-Public Banks
Fed
[in combo]
Blend of [private ownership (corporations) but public
(government) control]
The 12 banks are instruments of the government but not
owned by the government. The over 5,000 banks in the
12 districts buy stock ($1 per share) in their district bank
(& get 6% dividends [no capital gains]) so the banks are
privately owned. Serving the public, it is owned by citizens.
The 12 banks are a corporation owned by the banks
in their districts, but a public (G) agency directly
responsible to Congress.
They might make $30 billion - 90% to Treasury.
.
Four Part Structure of the Fed
Seven Board of Governors
 most important body of the Fed
 appointed by the President and
confirmed by the Senate
 14-year terms are staggered
(one replaced each two years)
[they are paid $162,100]
 isolation from political pressure
(only one 14 year term)
 the Chairman serves only four years but can be
reappointed [4-year renewable term] 4 times
 His pay is $180,100.
 Every president gets to appoint at
least two. Clinton appointed 8
& Bush appointed 4 in 1st 2 years.
 One term begins every 2 years on Feb. 1 of even numbered years.
2. Federal Open Market Committee [FOMC]
-Fed’s main policy-making arm
-includes 7 Board of Governors,
NY Fed President, and 4 other
bank presidents (rotate among
the other 11 every 3 years)
-other 7 bank presidents are
non-voting members
-they meet every six weeks
-they make about $30 bil. a year
(90% goes to the Treasury)
The FOMC Meeting Room in Washington DC
The FOMC meets around a 27-foot oval mahogany table in a room
with a 23-foot ceiling with a 1,000-pound chandelier.
Home of 7 Board of Governors
.
• Typical Meeting
• The entire committee [12 members + other 8 bank presidents] examine
regional, national and international economic info to assess the
strengths and weaknesses of the economy.
• After discussing the economy, the voting members vote on the
direction of monetary policy. A policy directive describes the committee’s
assessment of the economy and the new target fed funds rate.
• An announcement is made about 1:15 p.m.
3. Twelve Fed Banks and 25 Branches
4. Thousands of Member Banks
th-G-Chicago (1)
7
1st-A-Boston (0)
2nd-B-New York (1) 8th-H-St. Louis (3)
3rd-C-Philadelphia (0) 9th-I-Minneapolis (1)
th-J-Kansas City (3)
th
10
4 -D-Cleveland (2)
5th-E-Richmond (2) 11th-K-Dallas (3)
th-L-San Francisco (4)
th
12
6 -F-Atlanta (5)
Destroy/Issue paper notes
The Fed clears 40%;
Banks clear rest electronically.
Cash Services
Check
Processing
Electronic
Payments
 Store cash and coin
 Maintain currency’s quality
 Detect counterfeits
The Fed handled 42
billion electronic
transactions in 2006
Ben Bernanke Believes In “Core” Inflation Targeting
[Here is How It would Work]
2%
The Fed would choose and publish a target
goal for core inflation of–say, 2% a year..
The Fed publicly estimates how high it expects inflation to be in
the coming year. It steers monetary policy to try to hit the target
inflation rate. The Fed, in effect, is an “inflation hawk”.
If inflation is getting above the target, the bank raises interest
rates to cool the economy. If inflation is too low, the Fed
would lower interest rates to juice up growth.
The “Target Rate” is used in Britain, Canada, Australia, Sweden,
New Zealand, Brazil, and South Korea, working well in all seven.
In a crisis like 9/11, the Fed could still do
what was necessary to stabilize the economy,
that is, lower interest rates further.
Earthquake
14. The transaction demand [making daily, weekly, & monthly
transactions] for money is most closely related to money
functioning as a (medium of exchange/store of value).
15. The asset demand for money is most closely related to money
functioning as a (medium of exchange/store of value).
16. If nominal (money) GDP is $900 billion, and on the average, each
dollar is spent three times per year, then the amount of money
demanded for transaction purposes will be ($200/$300/$400).
17. The Dm will shift to the right as a result of a(n)
(increase/decrease) in nominal GDP. The Dm will
shift to the left as a result of a[n] (increase/decrease)
in nominal GDP.
18. The asset demand for money varies
(directly/inversely) with the interest rate.
19. The basic policy-making body in the American banking system is
the (Council of Economists/Board of Governors).
20. The Fed was created in (1900/1913/1929/2004)
21. Commercial Banks and thrifts, since 1980, have become
increasingly (similar/dissimilar).
MS2
5%
5%
200
5%
200
400
22. The transaction demand for money (“walking around” money) is
shown by (D1/D2/D3).
23. The asset demand for money (“betting” money) is shown by (D1/D2/3).
24. The total demand for money is shown by (D1/D2/D3).
25. If each dollar held for transaction purposes is spent 4 times per year,
nominal [money] GDP is ($200/$400/$600/$800).
26. If the Fed increased the MS, the MS curve would shift (right/left) and
the interest rate would (rise/fall).
27. The (Fed/Council of Economic Advisors) hold the
deposits of commercial banks, provide for the collection
of checks, act as fiscal agent for the federal government,
and exercise supervisory power over member banks.
28. In the U.S. economy, it is the (President/Congress/Fed)
who controls the money supply.
29. The 12 Fed banks are (privately/publicly) owned and
(privately/publicly) controlled central banks whose basic
goal is to control the money supply and interest rates in
stabilizing the economy.
30. The term “thrift” includes S&L’s, credit unions, and
(mutual savings banks/ commercial banks).
The End