Presentation on theme: "Monetary Policy and the Economy"— Presentation transcript:
1 Monetary Policy and the Economy By Paul D. Mixon
2 Monetary PolicyThe Fed’s 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 PolicyUsed to fight off inflation by restricting the availability of money.The money supply is restricted through:Increasing the reserve requirementIncreasing the discount rateSelling 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 requirementDecreasing the discount rateBuying government securities