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

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

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

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

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

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