Unit 4 - Basic Understandings
- Societies utilize institutions to promote order, security, and stability.
- Monetary units were created to make operations in the market easier.
- The Federal Reserve regulates the supply of money in the economy through monetary policy that increases the supply of money during contractionary periods or decreases the money supply during expansionary periods.
- Fluctuations in the business cycle or in the level of economic activity influence governmental fiscal policy decisions.
Unit 4 - Vocabulary
monetary policy - strategy taken by a central banking system to regulate the supply of money
fiscal policy - strategy taken by public officials regarding taxing and spending
reserve requirement - the amount of money banks are required to keep and not lend out
federal funds rate - the interest rate banks charge each other on loans
discount rate - the interest rate the Federal Reserve Bank charges commercial banks for loans
open market operations - a Federal Reserve practice of purchasing and selling government bonds intended to take money out or put money into the economy quickly
currency - a physical item, such as bills or coins, used as a medium of exchange
barter - the exchange of goods and services for goods and services
revenue - money raised by the government or money received by a firm doing business
expenditure - a payment, cost, or the amount of money spent
Unit 4 - Related Vocabulary
- Federal Reserve System
- taxes / tariffs
- commodity money
- representative money
- fiat money
- easy money policy
- tight money policy
Monetary Policy and the Fed
Unit 4 TEKS
(11) Economics. The student understands the role of money in an economy. The student is expected to:
(A) describe the functions of money;
(B) describe the characteristics of money, including commodity money, fiat money, and representative money; and
(C) analyze the positive and negative aspects of barter, currency, and debit cards.
(12) Economics. The student understands the role of the Federal Reserve System in establishing monetary policy. The student is expected to:
(A) explain the structure of the Federal Reserve System;
(B) analyze the three basic tools used to implement U.S. monetary policy, including reserve requirements, the discount rate and the federal funds rate target, and open-market operations;
(C) explain how the actions of the Federal Reserve System affect the nation's money supply; and
(D) describe the current role of the U.S. dollar in trade in the world market and analyze how that has changed over time, in particular since departing fro the gold standard in 1971.
(13) Economics. The student understands the role that the government plays in the U.S. free enterprise system. The student is expected to:
(A) describe the role of government in the U.S. free enterprise system and the changes in that role over time; and
(B) analyze the costs and benefits of U.S. economic policies, rules, and regulations related to the economic goals of economic growth, stability, full employment, freedom, security, equity (equal opportunity versus equal outcome), and efficiency.
(14) Economics. The student understands the economic impact of fiscal policy decisions at the local, state, and national levels. The student is expected to:
(A) identify types of taxes at the local, state, and national levels and the economic importance of each;
(B) explain the categories of revenues and expenditures in the U.S. federal budget; and
(C) analyze the impact of fiscal policy decisions on the economy.