32.1 POLICY TOOLS OF THE FEDERAL RESERVE SYSTEM

32.1 POLICY TOOLS OF THE FEDERAL RESERVE SYSTEM - SECTION...

Info iconThis preview shows pages 1–6. 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 DocumentRight 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
TOOLS OF THE FED TOOL 1: REQUIRED RESERVE RATIO The percentage of deposits that a bank must keep as reserves Deposits required reserve ratio $0 - $54 million 3% Over $54 million 10% The Fed can raise or lower the required reserve ratio. This affects the amount of money that banks are able to lend to the public.
Background image of page 3

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

View Full DocumentRight Arrow Icon
EXPANSIONARY MONETARY POLICY: LOWER THE REQUIRED RESERVE RATIO This will free up excess reserves that can then be loaned out. This will increase the money supply. CONTRACTIONARY MONETARY POLICY: INCREASE THE REQUIRED RESERVE RATIO This will cause more required reserves to be held Less money will be available to be loaned out. This will decrease the money supply. Changing the required reserve ratio is used very rarely.
Background image of page 4
TOOLS OF THE FED: TOOL 2: THE DISCOUNT RATE The interest rate that banks pay to the Fed when banks
Background image of page 5

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

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/13/2010 for the course ECON 0110 taught by Professor Kenkel during the Fall '08 term at Pittsburgh.

Page1 / 12

32.1 POLICY TOOLS OF THE FEDERAL RESERVE SYSTEM - SECTION...

This preview shows document pages 1 - 6. Sign up to view the full document.

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