1. Monetary Policy and the Economy
By Paul D. Mixon

2. Monetary Policy
The 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 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?