POLICY TOOLS OF THE FED

POLICY TOOLS OF THE FED - SECTION 32 POLICY TOOLS OF THE...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
SECTION 32: POLICY TOOLS OF THE FEDERAL RESERVE SYSTEM
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
MAJOR POLICY TOOLS OF THE FEDERAL RESERVE SYSTEM THE REQUIRED RESERVE RATIO THE DISCOUNT RATE CONDUCT OPEN MARKET OPERATIONS
Background image of page 2
REQUIRED RESERVE RATIO The percentage of deposits that a bank must keep as reserves Decisions concerning changing the ratio are made by the Board of Governors Reserve ratio is rarely changed.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Deposits required reserve ratio $0 - $54 million 3% Over $54 million 10%
Background image of page 4
POLICY DESCRIPTION Raising the required reserve ratio reduces the amount of reserves that can be loaned. (Contractionary policy) Reducing the required reserve ratio increases the amount of reserves that can be loaned. (Expansionary policy)
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
THE DISCOUNT RATE The interest rate that banks pay to the Fed when banks borrow from the Fed
Background image of page 6
Assume a bank has loaned out too much money It has less than the required amount of reserves. To get the needed reserves, the bank can ask the Fed for an overnight loan.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 17

POLICY TOOLS OF THE FED - SECTION 32 POLICY TOOLS OF THE...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online