Feb 1 - The Recession of 2008-2009: Recent Events &...

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Part II. Policy Responses to the Financial Crisis 1. Fiscal Policy: Changes in government spending (G) or taxes that are intended to influence aggregate demand. -Exercised by the legislative branch and the president. 2. Monetary Policy: Changes in the money supply and interest rates that are intended to influence aggregate demand. - Exercised by the fed. 3. The Federal Reserve System (Fed): central bank for the U.S. · Goals: “to promote sustainable economic growth, full employment, and stable prices” o Primary goal since early 1980s: price-level stability o Started by Paul Volcker, continued by Alan Greenspan, and Bob Bernanke · Functions: Providing financial services Maintaining stability of financial system Conducting monetary policy 4. The 3 Traditional Policy Tools of the Fed (IMPORTANT: Note that all 3 impact bank reserves, and thus, the money supply.) · Open market operations: Fed buys or sells Treasury bonds. When Fed buys bonds: bank reserves increase > loans
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This note was uploaded on 11/05/2009 for the course ECON 2200 taught by Professor Moore during the Fall '07 term at University of Georgia Athens.

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Feb 1 - The Recession of 2008-2009: Recent Events &...

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