Federal Reserve

Front 1

Expansionary Monetary Policy

Back 1

PROBLEM: High Unemployment and Recession
SOLUTION:
Fed Reserve buy bonds;
Lower required reserve ratio;
Reduce discount rate; or
Increase reserve auctions

Front 2

Effects of Expansionary Monetary Policy

Back 2

1. Excess reserves increase
2. Federal Reserve Funding Falls
3. Money Supply increases
4. Interest rate falls
5. Investment spending increases
6. Aggregate demand increases
7. GDP increases

Front 3

Restrictive Monetary Policy

Back 3

PROBLEM: Inflation
SOLUTION:
Fed Reserve sells bonds;
Increase required reserve ration;
Increase discount rate; or
Reduce reserve auctions

Front 4

Effects of Restrictive Monetary Policy

Back 4

1. Excess reserves fall
2. Federal Reserve Funding increases
3. Money supply falls
4. Interest rate increases
5. Investment spending falls
6. Aggregate demand falls
7. GDP falls

Front 5

Federal Reserve Functions and the Monetary Supply (7)

Back 5

1. Issuing Currency
2. Setting reserve requirements and holding reserves
3. Lending money
4. Providing for check collection
5. Acting as fiscal agent
6. Supervising Banks
7. Controlling the money supply