1. Today’s Schedule – 12/1 Quizzes Passed Back Monetary Policy PPT Unit 5 Test Review HW: – Study for Unit 5 Test – Stock Market Report: Due Monday

2. Monetary Policy (“MP”) Objective Influencing the amount of money and credit in the economy to promote – Economic growth – Full employment – Stable prices Set in terms of interest rates (“IR”) charged by banks

3. FOMC Federal Open Market Committee – Meet eight (8) times a year to set the nation’s monetary policy Include – FR’s Board of Governors – President of the FR Bank of NY – Presidents of four (4) other FR Banks Rotates yearly

4. Tools of MP Open Market Operations- Buy/sell securities Discount Rate- Changes in IR on short term loans Reserve Requirements- Changes in the percentage of deposits banks must keep on reserve in vaults

5. Tight MP Sale of securities – Takes money out of the economy IR go up because banks have less money to loan Consumers/businesses borrow less money Consumer spending decreases Economic growth decreases in the short term

6. Loose MP FR buys securities – Adds money into the economy IR go down because they have more money to lend Consumers/businesses borrow more Consumers increase spending Employment and economic growth increases