Federal Reserve System

Mandate of the Federal Reserve

Set policies that promote maximum employment and maintain stable prices/low inflation.

Board of Governors

A group of 7 members in Washington DC who oversee the Federal Reserve.

Term Length for Board Members

Can serve for 14 years.

Appointment of Board Members

Appointed by the president and confirmed by the Senate.

Chair of the Federal Reserve

Serves a 4-year term; recent chairs include Jerome Powell, Janet Yellen, and Ben Bernanke.

Federal Reserve Regional Banks

12 banks located across the US (including cities like Atlanta, Boston, and San Francisco).

Federal Funds Rate

The short-term interest rate at which banks lend to each other overnight.

How does the Fed achieve its mandates during a recession?

By lowering the Federal Funds Rate to reduce borrowing costs and stimulate growth.

Impact of high inflation on the economy

Restricts consumers as price increases outpace wage growth.

How does the Fed manage inflation?

By increasing interest rates through the Federal Funds Rate.

Long-term interest rates

Determined by the market price of US Treasuries, influenced by the Federal Funds Rate. The Fed cannot directly adjust long-term interest rates