Blog Video Summaries
3/26/16
3rd Video Summary
The third video talked about the three monetary tools of the Fed. There are two directions the Fed can take: Expansionary (Easy Money) or Contractionary (Tight Money). The three tools the Fed can use are the Reserve Requirement, the Discount Rate, and Open Market Operations (OMO).
Reserve Requirement- Percent of total deposits banks must keep in vault cash or on reserve with a Fed branch. This money CANNOT be loaned out.
Discount Rate- The rate at which banks can borrow money from the Fed.
Open Market Operations (OMO)- Buying or selling bonds or securities: Used most often
Federal Funds Rate- The rate at which banks can borrow from other banks
Under an Expansionary Policy, the Fed is trying to increase the Money Supply. In order to do so, they can: DECREASE the Reserve Requirement, DECREASE the Discount Rate, or BUY BONDS.
Under a Contractionary Policy, the Fed is trying to decrease the Money Supply. In order to do so, they can: INCREASE the Reserve Requirement, INCREASE the Discount Rate, or SELL BONDS/SECURITIES.
-JaelyNoTainted
Like Jaelyn (SPACE) Not (SPACE) Tainted
Get it?
No comments:
Post a Comment