1. Bellringer
1. What would you say about a 10% inflation rate?
2. Why are banks important to our economy?
3. What is a recession?
4. If the US GDP grew by 1.7% last year, were
we in a recession?
5. What part of our government prints our
money?

3. Great
Depression
1929-1933
27% drop in GDP
25% Unemployment
36% drop in World trade
43 straight months of
declining spending !!!!
Source Yoram Bauman, World Bank
“Great
Recession”
Housing Crisis
2007-2009
5 % drop in GDP
10% Unemployment
20% drop in World trade
18 straight months of
declining spending

4. What if the bank goes out of
business?
• $250,000 per US account

5. Who sets the reserve rate?
• “The
Fed”
• 1913

6. How does “the Fed” work?

7. Federal Reserve System

8. Monetary Policy
Fed’s Tools
Open market operations
Reserve Rate (%)
Discount Rate (%)
Lender of last resort

9. Why is the Chairman of the Fed sometimes
thought of as the “second most powerful
man in the US”?
• Cause: increases
interest rates
• Effect: ????
• Cause: lowers interest
rate
• Effect: ???

14. What about other countries?

19. What should The Fed do
with interest rates in 1955?

20. What should The Fed do with
interest rates in 1921?
US CPI 1914-1920

21. What should The Fed do
with interest rates in 1982?

22. What should The Fed do
with interest rates in 1982?

23. What should The Fed do
with interest rates in 1991?

24. What should The Fed do
with interest rates in 2010?

25. What should The Fed do
with interest rates in 2010?

26. What should The Fed do
with interest rates in 2013?

27. Fed Chairman game

28. Book 398-407
• Write a 1 page letter to Fed Chairman Ben
Bernanke
• Explain whether you support a expansionary or
contractionary monetary policy in 2013
• Mention what your policy might do to US
unemployment now at 7.5%
• Mention what your policy might do to US
inflation now at 2.0%
• Fed Funds rate now at 0.5 % (50 cents/$100)

29. After Inflation & Unempl sheets
finished
Write a 1 page letter to
Congressman Raul Grijalva
2 fiscal policy changes you
agree with, be sure to
include the effects of those
changes