Monetary Policy. Monetary Policy = it refers to what the Federal Reserve does to influence the amount of money and credit in the economy. What happens.

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Presentation transcript:

Monetary Policy

Monetary Policy = it refers to what the Federal Reserve does to influence the amount of money and credit in the economy. What happens to money and credit affects interest rates and the performance of the economy.

Monetary Policy The value of money goes down if we have inflation. Inflation = a sustained increase in the general level of prices …incomes don’t rise as fast as inflation …lenders will lose by not getting the same value back on money lent out …businesses find it harder to plan and may lay off people …owners of financial assets find their investments have lost value.

Promote sustainable economic growth, full employment, stable prices. Monetary Policy Goals Open Market operations Discount rate Reserve requirements Tools

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