Social Studies - 2019-20

GOVT.15e - Federal Reserve Bank

The student will apply social science skills to understand the role of government in the Virginia and United States economies by 

e) describing the effects of the Federal Reserve’s monetary policy on price stability, employment, and the economy; 

Adopted: 2015

BIG IDEAS

UNDERSTANDING THE STANDARD

The Federal Reserve System serves as the United States’ central bank. Monetary policies are decisions by the Federal Reserve System that lead to changes in the supply of money, short-term interest rates, and the availability of credit. 

ESSENTIALS

Monetary policies are decisions by the Federal Reserve System that lead to changes in the availability and cost of money and credit in order to promote price stability, full employment, and sustainable economic growth. 

The Federal Reserve’s Open Market Committee is responsible for monetary policy decisions. 

The Federal Reserve conducts monetary policy by buying and selling government securities to influence the money supply and interest rates. 

In response to economic weakness, the Federal Reserve may implement monetary policy that helps to lower interest rates in order to stimulate employment and economic growth. 

Conversely, in response to an overheating economy, the Federal Reserve may implement monetary policy that aims to increase interest rates in order to restrain inflation.

KEY VOCABULARY

Updated: May 17, 2017