Concepts
- The Federal Reserve System (FED)
- Board of Governors
- 12 Regional Banks
- Federal Open Market Committee (FOMC)
- Functions of the Federal Reserve
- Maintain the Federal Government’s Bank Account (US Treasury)
- Clear Checks (facilitate electronic transfer of money)
- Regulate and Supervise Banks Across the Country
- Hold our Nation’s Reserves (lock up a lot of extra cash in a big vault)
- Supply New Currency
- Conduct Monetary Policy (Regulate the Money Supply)
Overview
The Federal Reserve is the central bank of the United States. It was created by congress in 1913 and it’s main purpose back then was to provide emergency cash reserves to local banks to help prevent financial panics. As a result of the Great Depression and other major economic events, the role of the Federal Reserve has evolved over time. Over the past few decades, it has become much more active in managing our economy through its implementation of monetary policy. It’s also important to understand that the Federal Reserve is a system, not just one physical location. This system is broken up into three major parts: the Board of Governors, 12 Regional Banks, and the FOMC. These 3 parts work together to perform many different functions that will hopefully help keep our banking system and our economy running smoothly.
Materials
Lecture
Quiz
No quiz on this lesson because there will not be any direct questions about this material on the AP Exam. However, these concepts are needed to understand other material that will be tested on the AP Exam so don’t overlook this lesson!!