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Added See Also
The Fed's open-market committee can buy or sell [[Treasury Bonds]] to cause money to flow toward or away from the government. These sales or purchases are known as [[open-market operations]].
The Fed's open-market committee can buy or sell [[Treasury Bonds]] to cause money to flow toward or away from the government. These sales or purchases are known as [[open-market operations]].
'''Monetary policy''' is policy enacted by a [[government]] or government agency with the aim of controlling the [[money supply]].
[[Federal Reserve Bank]] actions to influence the availability and cost of [[money]] and [[credit]] as a means of helping to [[unemployment|promote high employment]], [[economic growth]], price stability, and a sustainable pattern of [[international]] transactions.
In the United States, monetary policy is made by the [[Federal Reserve Bank]] and operates using three main tools:
* The reserve ratio
* The discount rate
* Open-market operations
==The Reserve Ratio==
The '''[[reserve ratio]]''' is the ratio of money deposited in a [[bank]] that the bank is required to keep on hand. This amount of reserves is to ensure that banks can meet [[bank run|withdrawal demand]] and also prevents banks from becoming too leveraged.
==The Discount Rate==
The '''[[discount rate]]''' is the rate at which the Federal Reserve Bank will lend money to individual banks. The Fed is a lender of last resort and banks generally meet reserve shortfalls by borrowing from other banks; borrowing from the Fed can be seen as a bellwether of [[insolvency]].
==Open-Market Operations==
The Fed's open-market committee can buy or sell [[Treasury Bonds]] to cause money to flow toward or away from the government. These sales or purchases are known as [[open-market operations]].
==See Also==
* [[Quantitative easing]] - [[QE1]], [[QE2]], [[QE3]]
* [[Inflation]]
* [[Federal Reserve Bank]]
* [[National debt]]
* [[Treasury bill]]s
* [[Housing bubble]]
* [[Subprime loans]]
* [[Economic bubble]]
* [[Economic crash]]
==References==
<references/>
==Sources==
==Sources==
http://usinfo.state.gov/products/pubs/oecon/chap12.htm
http://usinfo.state.gov/products/pubs/oecon/chap12.htm
[[Category:Economics]]
[[Category:Economics]]