The_Fed

The Fed Earlier we learned the important of Fiscal Policy and Fiscal Spending to combat inflation. In this unit, we learn that the Federal Reserve is another important player in the government operation to balance out monetary expansion. Through the use of reserve requirement, discount rate, and open market operations, the Fed have the opportunity to dictate the monetary policy. Through these decisions, policy either leaders towards a tight money supply (a decreased money supply) or a loose money supply (an increased money supply). During the four business cycles, the Fed dictates the levels of each in order to pull out of a depression or balance a peak. The reserve requirement is the percent of deposits a bank must keep on hand. If the Federal Reserve increases the reserve requirements, the money supply decreases. This is often the policy of a peak in order to combat heavy inflation as more people can afford to borrow and there is more investments. Decreasing the reserve requirement is done to increase the money supply of a recession or depression. Interest the Federal Reserve charge member banks for overnight borrowing is known reserve, money, supply, policy, rate, discount, federal, peak, open, often, monetary, market, through, securities, requirement, out, order, observation, inflation, fiscal, fed, depression, decreases, borrowing, banks, requirements, recession, must, method, loose, increasing, increases, important, during, combat, bank