Presentation on theme: "Monetary Policy and the Economy By Paul D. Mixon."— Presentation transcript:
Monetary Policy and the Economy By Paul D. Mixon
Monetary Policy The Feds ability to impact the economy through its control of the money supply.
Two Types of Monetary Policy Tight Money Policy – restricting the growth of the money supply. Easy (Loose) Money Policy – expanding the money supply.
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
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