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Monetary Policy and the Economy By Paul D. Mixon.

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Presentation on theme: "Monetary Policy and the Economy By Paul D. Mixon."— Presentation transcript:

1 Monetary Policy and the Economy By Paul D. Mixon

2 Monetary Policy The Feds ability to impact the economy through its control of the money supply.

3 Two Types of Monetary Policy Tight Money Policy – restricting the growth of the money supply. Easy (Loose) Money Policy – expanding the money supply.

4 Tight Money Policy Used to fight off inflation by restricting the availability of money. The money supply is restricted through: –Increasing the reserve requirement –Increasing the discount rate –Selling government securities

5 Easy (Loose) Money Policy Used to fight off high unemployment or a recession by increasing the availability of money. The money supply is increased through: –Decreasing the reserve requirement –Decreasing the discount rate –Buying government securities

6 Questions?


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