CHAPTER15Monetary PolicyChapterOutlineandLearningObjectives15.1WhatisMonetaryPolicy?15.2TheMoneyMarketandtheFed'sChoice of MonetaryPolicy Targets15.3MonetaryPolicyandEconomicActivity15.4MonetaryPolicyintheDynamicAggregateDemandandAggregateKIJovnanianSupplyModel15.5ACloserLookattheFed'sSettingSOLDofMonetary Policy Targets15.6FedPoliciesduringthe2007-2009Recession
1 Chapter Outline and Learning Objectives 15.1 What is Monetary Policy? 15.2 The Money Market and the Fed’s Choice of Monetary Policy Targets 15.3 Monetary Policy and Economic Activity 15.4 Monetary Policy in the Dynamic Aggregate Demand and Aggregate Supply Model 15.5 A Closer Look at the Fed’s Setting of Monetary Policy Targets 15.6 Fed Policies during the 2007-2009 Recession CHAPTER 15 CHAPTER Monetary Policy
WhatCantheFederal ReserveDo?Last chapter we introduced the monetary policy tools that the FederalReserve can use to influence the money supply.: Now we will address how and why the Fed takes the actions that itdoes.Wewill also pay special attention to the unique circumstancessurrounding the recession of 2007-2009, and the Fed's responsetothosecircumstances.@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 2 What Can the Federal Reserve Do? Last chapter we introduced the monetary policy tools that the Federal Reserve can use to influence the money supply. • Now we will address how and why the Fed takes the actions that it does. • We will also pay special attention to the unique circumstances surrounding the recession of 2007-2009, and the Fed’s response to those circumstances
WhatisMonetaryPolicy?15.1LEARNINGOBJECTIVEDefine monetarypolicyand describetheFederal Reserve'smonetary policygoals.@2015PearsonEducation,lnc3
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 3 What is Monetary Policy? 15.1 Define monetary policy and describe the Federal Reserve’s monetary policy goals
WhatlstheRoleof theFederal Reserve?WhentheFederalReserve wascreatedinthe1913,itsmainresponsibility was to prevent bank runs..After the Great Depression of the 1930s, Congress gave the Fedbroader responsibilities:to act“so as to promote effectively thegoals of maximum employment, stable prices, and moderate longterm interest rates."Since World War ll, the Fed has carried out an active monetarypolicy.Monetary policy: The actions the Federal Reserve takes to managethe money supply and interest rates to pursue macroeconomic policygoals.@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 4 What Is the Role of the Federal Reserve? When the Federal Reserve was created in the 1913, its main responsibility was to prevent bank runs. • After the Great Depression of the 1930s, Congress gave the Fed broader responsibilities: to act “so as to promote effectively the goals of maximum employment, stable prices, and moderate longterm interest rates.” Since World War II, the Fed has carried out an active monetary policy. Monetary policy: The actions the Federal Reserve takes to manage the money supply and interest rates to pursue macroeconomic policy goals
TheGoalsof MonetaryPolicyThe Fed pursues four main monetary policy goals:1. Price stability2.High employment3.Stability of financial markets and institutions4. Economic growthWewill considereachgoal inturn@2015PearsonEducafion,lnc
© 2015 Pearson Education, Inc. 5 The Goals of Monetary Policy The Fed pursues four main monetary policy goals: 1. Price stability 2. High employment 3. Stability of financial markets and institutions 4. Economic growth We will consider each goal in turn