Tools of monetary policy

Fiscal policy is run by congress and the president, they tax or spend

Monetary policy is conducted by the FED. The only people that benefit from fed are banks FDIC insured. OMO open market operations, discount rate, federal fund rate, reserve requirement.

Reserve requirement= amount of money banks have to keep in reserves

Discount rate is the interest rate that the fed charges commercial banks for borrowing money

Federal fund rate is where FDIC member banks loan each other overnight funds in order to balance accounts each day (simply interest rates for banks to borrow from banks)

Prime rates the interest rate the banks charge their most credit worthy customers (usually below 4%)

	expansionary (Easy money, recession)	Contractionary “tight money” inflation
Open market operation (OMO) ( buy or sell securities (Bonds)	Buy bonds increase money supply	Sell bonds decrease money supply
Discount rate	Decrease	increase
Reserve requirement	decrease	increase