November 19 2007 - The Federal Reserve tweaks monetary...

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November 19 2007 Interest rates are the cost of money. The demand for money and the supply of money is the loan-able funds theory. When someone wants to supply you money they give you all you want at high interest rates. The economy buys money at a low rate. Interest rates are a commodity. The demand for money encompasses 2 things, transactions and demand for assets. b Interest rates go down price goes up, interest rates go up and price goes down. The assets of the Federal Reserve 1) Securities 2) Make loans to commercial banks. 3) Their liabilities- things that the Federal Reserve owes. Federal Reserve notes, reserves of the commercial banks,
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Unformatted text preview: The Federal Reserve tweaks monetary policy. Cyclical Asymmetry- Expansionary monetary policy = easy money 3 major tools of the Federal Reserve 1) Open market operations 2) Reserve requirements 3) Discount rate When the federal banks buys they put cash out and they take securities back. When you put money into the system excess reserves increase because there is more money in the system. Money rate rises intrest rates fall. Money supplies contrated interest rateds rise. Investment money increase 1)rates fall Federal reserve sells bonds....
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