Monetary Policy Options

EQ: What is Monetary Policy?

Definitions:

Money Manufacturing - printing money, controlled by gov’t

Money Creation - controlled by banks; banks loan out money that a person/company uses for dif. purposes, adds to the original amount

Federal Reserve Requirement - the amount of money banks must keep in their systems

Increased FR Requirement - decreased lending, money supply contracts

Decreased FR Requirements - increased lending, money supply expands

Discount Rate - the general interest rate charged on loans, issued by the Federal Reserve/banks

Open Market Operations - gov’t buys/sells bonds

Gov’t Buys Bonds - increases lending, expands money supply

Gov’t Sells Bonds - decreases lending, contracts money supply