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Lect 4.2 Monetary Policy

Lect 4.2 Monetary Policy

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Published by: api-3696178 on Oct 16, 2008
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05/09/2014

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MONETARY POLICY
Objectives
After studying this chapter, you will able to
\ue000Describe the structure of the Federal Reserve System
(the Fed), and the tools used by the Fed to conduct
monetary policy
\ue000Explain what an open market operation is, how it works,
and how it changes the quantity of money

\ue000Explain what determines the demand for money
\ue000Explain how the Fed influences interest rates
\ue000Explain how the Fed\u2019s actions influence spending plans,

real GDP, and the price level
Temple of Secrets
The book with the title Temple of Secrets: How the Federal
Reserve Runs the Country was a best seller: What is the
Fed, and what does it do?

During 2001, as the economy slowed, the Fed cut interest rates 11 times from over 6 percent to below 2 percent. In 2000, more concerned about inflation than recession, the Fed raised interest rates.

How does the Fed change interest rates, and how does
that influence real GDP and inflation?

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