Demand for Money Notes

If demand for money is fluctuating it makes sense for

Info iconThis preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: emand for money is fluctuating, it makes sense for Fed to change money supply to account for those changes. ! Monetary Policy in the Financial Crisis: 2007-2011 First conventional, then unconventional monetary policy - Fed lowered the fed funds rate virtually to zero (conventional monetary policy) - Required little increase in reserves - Then engaged in large-scale asset purchases (open market operations) to put downward pressure on long-term interest rates (unconventional monetary policy) ! How Monetary Policy Really Works - Fed funds rate set in the market for reserves, not in market for money - Fed controls supply of reserves, but it does not attempt to control the money supply - Textbooks present analysis in terms of market for money partly for simplicity, partly because of inertia ! 11/21! Re...
View Full Document

Ask a homework question - tutors are online