The Fed and Monetary Policy

Briefly Explained.

The Federal Reserve Board is a Progressive Era independent government agency that controls and manipulates the money supply against the reserve. By altering the discount (interest) rate to commercial banks, the Fed can encourage or discourage borrowing, and thus put money or less money into circulation. Altering the money supply alters the value of the dollar, and can encourage or discourage certain economic activities that would have lasting impact on the economy.

Watch this short video and answer the questions that follow.


1. Describe one structural trait of the Federal Reserve Board.

2. In addition to altering the discount rate, what’s another step the Fed can take to impact the economy?

3. Explain how that step impacts the economy.


Photo/Image: The Federal Reserve in DC, by Agnostic Preacher’s Kid via Creative Commons