Difference between revisions of "Monetary policy"
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| − | Federal Reserve | + | '''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 collapse]] | ||
| + | * [[:Category:Survivalism|Economic preparedness]] | ||
| + | |||
| + | ==References== | ||
| + | <references/> | ||
==Sources== | ==Sources== | ||
http://usinfo.state.gov/products/pubs/oecon/chap12.htm | http://usinfo.state.gov/products/pubs/oecon/chap12.htm | ||
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| + | {{Economic preparedness topics}} | ||
| + | |||
| + | [[Category:Economic Preparedness]] | ||
[[Category:Economics]] | [[Category:Economics]] | ||
| + | [[Category:Survivalism]] | ||
Latest revision as of 02:43, September 18, 2016
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 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
Contents
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 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 bills
- Housing bubble
- Subprime loans
- Economic bubble
- Economic collapse
- Economic preparedness
References
Sources
http://usinfo.state.gov/products/pubs/oecon/chap12.htm
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