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Line 1: − '''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]]. − − −
Spelling/Grammar Check & Cleanup
'''Monetary policy''' is policy enacted by a [[government]] or government agency with the aim of controlling the [[money supply]].
'''Monetary policy''' is policy enacted by a [[government]] or government agency with the aim of controlling the [[money supply]].