fed - F e d e ra l R e s e rv e Goals F e d e ra l R e s e...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Federal Reserve Economics 71a Spring 2007 Mayo, Chapter 5 (skim) Lecture notes 2.5 Federal Reserve Goals Stable prices Full employment Growth Tools Monetary policy Bank regulation Money Growth and Inflation “Why monetary policy is tricky” (Money growth) > (Economic growth) Inflation (Money growth) < (Economic growth) Deflation Getting this right is tricky The Federal Reserve and the Money Supply The Fed does not set the money supply Indirect tools Reserve requirements Discount rate Open market operations All are only indirect
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 Reserve Requirements Deposit $100 in bank Bank must keep % (reserve) in vault Loans out rest Example 10%: Keep $10 (reserve), loan $90 This $90 ends up at another bank Keep $9, loan $81 Money multiplier Reducing the reserve requirement has big positive impact on the money supply Rarely done Discount Rates Banks can borrow reserves from the Fed Interest rate Fed charges banks is called the
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/02/2012 for the course FINANCE 347 taught by Professor Bayou during the Fall '11 term at NYU.

Page1 / 3

fed - F e d e ra l R e s e rv e Goals F e d e ra l R e s e...

This preview shows document pages 1 - 3. Sign up to view the full document.

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