1. TOOLS OF FED POLICY OPEN MARKET OPERATIONS DISCOUNT LOANS
CHANGES IN REQUIRED RESERVES

2. Open Market Operations

3. . FED buys our securities from us. Pays for them by crediting our account

4. We lend out what we have in excess reserves

5. As checks clear against our bank we get
Initial increase in deposits $500,000

6. Discount loans

7. We make loans out of the $20,000 borrowed from the FED

8. checks clear against our bank …
Initial increase in deposits $20,000

9. Changes in rD

10. change rD from 10% to 5%

11. checks clear against our bank we end up with …
Initial increase in deposits $50,000