Description

The Federal Reserve Part 1

1)     Let’s talk about the federal reserve. What is it, why was it created and what purpose does it seek to accomplish?

2)     When was the reserve was it created and why?

• Banks needed a source of emergency reserves to prevent the panics and resulting runs from driving them out of business. A particularly severe panic in 1907 resulted in bank runs that wreaked havoc on the fragile banking system and ultimately led Congress in 1913 to write the Federal Reserve Act

3)     What about how the Federal Reserve is setup:

• Is it a government agency?
• How are members selected to serve in this group?
• How often do they meet?

4)     What are the main directives of the Federal Reserve?

·        Regulate inflation 

·        What is Inflation and why is it important to the economy?

1.      Inflation is a sustained rise in overall price levels. Inflation is the decline of purchasing power of a given currency over time

2.      Moderate inflation is associated with economic growth, while high inflation can signal an overheated economy. If economic growth accelerates very rapidly, demand grows even faster, and producers raise prices continually.

a.      Stagflation - Stagflation is a period when slow economic growth and joblessness coincide with rising inflation

b.     Deflation is the decrease of asset prices or the prices of goods and services. Also known as a negative inflation rate, deflation occurs when prices fall. As prices deflate, purchasing power increases, meaning consumers can use the same amount of money to purchase a larger amount of goods or services. 

c.      Hyperinflation refers to rapid and unrestrained price increases in an economy, typically at rates exceeding 50% each month over time.

3.      Inflation In Venezuela

a.      The rising inflation numbers have caused severe economic hardships for its people

b.      95% of Venezuela are living in extreme poverty

•  Its hard to argue that hyperinflation hasn’t been one of the main culprits for this phenomenon

Venezuela - Inflation Data

“Pasta is an affordable staple in the U.S where two pounds (which is approximately one kilogram)

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