TOOLS OF MONETARY POLICY
Expansionary
- buy bonds which increase money supply, decrease discount rate and reserve requirement
Contractionary
- sell bonds which decrease money supply, increase discount rate and reserve requirement
Fiscal Policy
- President and Congress
- tax or spend
Monetary Policy
- FED (Federal Reserve Requirement
- open Market Operations
- discount rate
- federal fund rate
- reserve requirements
Discount Rate
- interest rate that the Fed charges commercial banks for borrowing money
Reserve Requirement
- amount of money banks are required to hold
- fraction of money must keep in reserves
- Why is it low? Banks can loan out more money
Federal Fund Rate
- interest rate that commercial banks charge one another for an overnight loan
Prime Rate
- interest rate that banks charge their most credit worthy customer
Great blog! I really like the organization and how straight to the point each category is although expanding a little bit more about the policies would allow a better comprehension of it.
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