Monetary Policy Basics
To control the money supply and stabilize the economy
What is the main goal of the Federal Reserve?
What is it called when the Fed buys or sells government bonds?
Open Market Operations
Government decisions about taxes and spending
What is fiscal policy?
When government spending is greater than revenue
What is a deficit?
The economy is in a recession. The Fed use this policy?
What is Expansionary?
What type of policy increases the money supply?
Expansionary monetary policy
This causes the money supply to increase
What is the Fed buys bonds?
The Congress and the President, not the Fed or Judiciary.
Who controls fiscal policy?
When revenue is greater than spending
What is a surplus?
Prices are rising quickly. The Fed uses this type of monetary policy.
What is needed Contractionary?
Contractionary monetary policy
What type of policy decreases the money supply?
The interest rate the Fed charges banks
What is the discount rate?
Increasing government spending or lowering taxes are examples of...
What is expansionary fiscal policy?
Deficits increase it.
What is national debt?
The government wants to create jobs. The President and Congress will take these as fiscal actions.
What is increase spending or lower taxes?
Borrowing increases
What happens to borrowing when interest rates are lowered?
Banks lend less money when this increases
What is the reserve requirement?
Increasing taxes or decreasing spending are examples of...
What is contractionary fiscal policy?
The total amount the government owes over time
What is the national debt?
The Fed wants to slow inflation by taking this Open Market Operation. What is sell bonds?
What is sell bonds?
Why does the Fed try to control inflation?
To keep prices stable and protect purchasing power
Interest earned by banks on their reserves increases
What is banks hold money instead of lending it?
To stimulate economic growth and create jobs during a recession
Why might the government increase spending during a recession?
The government can reduce a deficit by these
What are Increase taxes or decrease spending?
The economy has high unemployment. Name one Fed tool?
What is buy bonds / lower discount rate / lower reserve requirement?