Unit 4 – Money & Banking / Monetary Policy (3-26-16)

Ap Macroeconomics Unit 4 - The Fed's Tools of Monetary Policy

Part 4

https://www.youtube.com/watch?v=XJFrPI8lLzQ&feature=bf_next&list=PL2CB281D126F65E26&lf=results_video

Overview-

There are 3 types of tools that the fed uses for Monetary Policy. They are split into two parts Expansionary and Contractionary (Ez. money and Tight Money) which is further split into 4 parts which is RR (Reserve Ratio).Discount rate, Securities/Bonds (Fed buys/sells to change money supply) and is changing the Fed Funds Rate. Expansionary has a decreasing value of RR, Discount rate, Securities/Bonds where the Fed buys bonds to increase the money supply. Contractionary has a increasing value of RR and Discount rate then in Securities/Bonds Fed sells bonds which decreases the money supply.