Sunday, March 27, 2016

The FED- Tools of Monetary Policy



Summary:

The Reserve Requirement (RR) is the percentage of money from deposits that the bank must keep either as vault money or on reserve with a Fed branch. Altering the RR changes the money supply; the absence or lowering of the RR had a great impact on the cause of the Great Depression. Lowering the discount rate, or the interest rate the Fed charges commercial banks they have loaned money to, should increase the Fed’s loan activities. “Buy Bonds= Big Bucks”, if the Fed buys bonds, it means more money for the people which will ultimately raise the money supply.

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