Monetary Policy Unit 16.3.

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Presentation transcript:

Monetary Policy Unit 16.3

The Fed’s Monetary Tools Monetary Policy Actions that change the money supply Open Market Operations Fed buys and sells government securities Federal Funds Rate (FFR) Rate at which banks lend to each other Discount Rate Rate at which the Fed loans money Prime Rate Rate for best customers

Approaches to Monetary Policy Expansionary Monetary Policy Easy Money Policy Contractionary Monetary Policy Tight Money Policy

Impacts and Limitations of Monetary Policy Short Term Effects Policy Lags Monetarism

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