Download presentation
Presentation is loading. Please wait.
1
Stabilizing the Economy: The Role of the Fed Chapter 14
2
Chapter 14 Learning Objectives. You should be able to: Distinguish between the Federal funds rate and the discount rate. Explain how the Fed influences the interest rate. Show how a demand and supply diagram can be used to model the determination of the Federal Funds rate. Show the effect of expansionary and contractionary monetary policy on the Keynesian cross diagram.
3
Important Distinction Federal Funds Rate -rate of interest banks charge one another for short-term loans. Money is transferred between accounts at the Fed—hence fed funds Discount Rate -rate of interest the Fed charges banks for short-term loans. Originally banks would sell loans to the Fed. The present value would be calculated using the rate of discount.
5
Most Important Tool of Monetary Policy Open market operations: the purchase or sale of Treasury securities by the Fed Sell Treasury securities: contractionary. Buy Treasury securities: expansionary.
Similar presentations
© 2024 SlidePlayer.com Inc.
All rights reserved.