Monday November 26 2007

Monday November 26 2007 - resort The discount rate is the...

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Monetary policy *Monetary policy makes the Federal Reserve responsible for 1) Full employment - 2) price stability 3) economic growth 3 Major tools of the Federal open market operations- most important thing on a daily basis the fed does. When the fed buys there putting loquity in the system. Interest rate should go lower. On a daily basis the open market operations is how the fed on an opne market economy tweaks the economy. Reserve requirements- the sledgehammer, are had to allow the Federal Reserve to control the money supply and credit to get their goals done. Adjust the reserve requirements. Discount rate- relatively minor. Lending money to banks. The fed is the lender of last
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Unformatted text preview: resort. The discount rate is the rate they charge banks when they need money. Federal funds are reserves. Relations ship between the federal funs rate and the discount rate. Prime rate- what the banks were giving to the most trustworthy of customers. Individual banks set the prime rate. Bank panics- Cyclical asymmetry- even when money is put in the system there is no guarantee there gonna use it. The federal reserve has many ways they control the free market Artful management- Alan Greenspan Inflation targeting...
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