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MONETARY POLICY Conducted by: the Federal Reserve System
Tools of the Federal Reserve Fractional Reserve System (reserve ratio) Reserve Requirement Excess Reserves ( may be loaned out to businesses/private individuals; increases the money supply)
Deposit Expansion Multiplier 1/reserve ratio = multiplier Multiplier X Excess Reserves = Total money creation
Other Tools Discount Rate Federal Funds Rate Open Market Operations (conducted by the FOMC) Buying bonds from public increases money supply Selling bonds to public decreases money supply
Expansionary Monetary Policy (loose) Used to resolve recessions, unemployment, and problems of slow productivity Discount Rate & Fed. Funds Rate decreases Reserve Ration lowered Open Market Operations- buy bonds.
Contractionary Monetary Policy (tight) Used to resolve problems associated with inflation Discount Rate & Fed Funds Rate increased Reserve Ratio raised Open Market Operations – sell bonds
Federal Reserve and Macroeconomic Policy
Money Multiplier Objectives: 1.Determine the maximum potential extent to which the money supply will change following a Federal Reserve purchase or sale.
Taxes, Fiscal, and Monetary Policies
Monetary Policy and the Economy
MONETARY POLICY Actions the Federal Reserve takes to influence the level of GDP and the rate of inflation in the economy.
Textbook PowerPoints = TMI Maurer’s PowerPoints = JEI.
Monetary Policy Multiple Choice Practice
Sides Games. Which M? Just currency Which M? Currency Check deposits (demand deposits)
Macroeconomics Study Guide. How do we measure the health of our economy? First Economic Indicator: GDP Second Economic Indicator: Inflation Third Economic.
The Federal Reserve. What is the Federal Reserve?? central bank of the US created in 1913 by an act of Congress & restructured after the Great Depression.
CHAPTER 15 MONETARY POLICY Tools 2 and 3. 2 nd Tool: Reserve Ratio Manipulation of the Reserve Ratio can influence the ability of commercial banks to.
Monetary Policy Involves controlling the money supply to change the level of GDP or the rate of inflation.
Chapter 15: Monetary Policy Federal Reserve Board Chairperson Federal Reserve Board (7) Federal Open Market Committee (12) Deliberate changes in money.
Monetary policy- changes in the money supply to fight inflations or recessions.
33 Interest Rates and Monetary Policy McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Do you know anyone who is paying a mortgage off? How many people in this class want to own a home?
Monetary Policy Review
Monetary Policy Tools. Monetary Policy Federal Reserve Act of 1913 created the Federal Reserve System –“The Fed” provides the U.S. banking system with.
Monetary Policy Regulating Money Supply. 1.Discount Rate Changes Interest rate at which Banks borrow directly from the Fed It is only used in an “emergency”
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