Monetary Policy Chapter 15
Chapter 15 Table 15.1 Fed Assets and Liabilities
The Principal Asset is U.S. Treasury Bonds (Securities) The Principal Liability is Federal Reserve Notes Outstanding These nearly balance because the bonds were acquired putting the dollars into circulation The Fed’s available stock of bonds could be used to remove the dollars from circulation Bonds expire – dollars don’t
Chapter 15 Figure 15.1 Putting Money into Circulation
Chapter 15 Table 15.2 Changing the Reserve Ratio
Chapter 15 Figure 15.2(a) The Impact of Changing the Money Supply on the Interest Rate
Chapter 15 Figure 15.2(b) How Changing the Money Supply and the Interest Rate affect Investment Spending
How Monetary Policy Affects Real Output and Employment Increasing the Money Supply lowers interest rates Lower interest rates lead to more borrowing and higher Investment spending (I g ) Increasing AE and AD Resulting in higher equilibrium GDP And higher employment But higher prices (inflation)
Chapter 15 Figure 15.2(c)
Chapter 15 Table 15.3
Chapter 15 Figure 15.3 The Federal Funds Rate determines other Interest Rates
Chapter 15 Table 15.4
Chapter 15 Figure 15.4(a) Public Policy and AS
Chapter 15 Figure 15.4(b) Fiscal and Monetary Policy and AD