AP Macro Lecture Guide: How the Fed Implements Monetary Policy
The Federal Reserve (Fed) is the central bank of the United States. Its congressionally mandated objectives are to promote maximum employment and price stability. This lesson begins with a description of how the Federal Open Market Committee (FOMC) conducts monetary policy to achieve this dual mandate. Then, using the College Board’s reserve market graph, the discussion shifts to how a central bank might use monetary policy tools to influence market interest rates and, ultimately, employment and inflation outcomes. Finally, examples of how a central bank responds to various economic shocks are presented to reinforce the key concepts covered in this lesson.
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