The Fedís monetary policy is fairly easy to understand. The three primary tools used are simple enough: the discount rate, reserve requirements, and open market operations. As we discussed in class, they affect the flow of money in the banking system... Showed first 250 characters
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The Fedís monetary policy is fairly easy to understand. The three primary tools used are simple enough: the discount rate, reserve requirements, and open market operations. As we discussed in class, they affect the flow of money in the banking system... Showed next 250 characters
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Hilton disagrees with Laffer that the Fed is not influential or important. On slide 2 of Spence Hilton's Framework for Implementing Monetary Policy, he gives a simple example that illustrates how The Three Tools of Domestic Monetary Policy work...
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An expansionary policy multiplies the total supply of money in the economy, and a contractionary policy diminishes the total supply. Expansionary policy is used to tackle unemployment in an economic decline by lowering interest rates, while contractionary policy has the goal of elevating interest rates to fight inflation...
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Monetary policy has some basic goals: to promote "maximum" sustainable output and employment and to promote "stable" prices...
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The Fedís primary goal is to ensure that the amount of money and credit are balanced to foster continue economic growth without causing inflation. When inflation is so high that currency loses its value, the Fed needs to restrict the money supply in the system...
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Monetary policy is the ďdeliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy.Ē (McConnell & Brue, p...
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The Federal Reserve System was created in 1913 and is the central bank of the United States. "It was created by Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system" (Federal FAQ, 2006)...
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Tools of Monetary Policy
The first tool of monetary policy to explore is the use of reserve requirements. The Federal Reserve requires a percentage of all deposits at a bank must be kept on hand at the bank or in a Federal Reserve Bank...