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Open Market Operations
The process by which the central bank buys or sells government bonds to influence the money supply.
Money Supply Shifters
The factors that influence the amount of money in circulation, including the reserve ratio, discount rate, and open market operations.
Discount Rate
The interest rate the Federal Reserve charges commercial banks to borrow money.
Reserve Requirement
The percentage of deposits that banks are required to hold in reserve and not loan out.
Federal Reserve (FED)
The central bank of the United States responsible for regulating monetary policy.
Treasury Bonds (T-bills)
Government-issued bonds used in open market operations by the Federal Reserve.
Increase in Money Supply
Occurs when the FED buys bonds, lowers the discount rate, or decreases the reserve requirement.
Decrease in Money Supply
Occurs when the FED sells bonds, raises the discount rate, or increases the reserve requirement.
Fractional Reserve Banking
A banking system in which banks hold a fraction of deposits in reserve and loan out the remainder.
Aggregate Demand
The total demand for goods and services within an economy.
Note 
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