AP Macroeconomics Unit 4 - Part 4

Fed Tools of Monetary Policy

Expancionary Policy-Easy- Vault cash or on reserve,

• To expand they lower the reserve. 
• To expannd buy, Bonds = Big Bucks.

Contractionary Policy-Tight-

• To contract raise the reserve requirement.
• To contract sell bonds.

Discount rate-Interest rate at which banks can borrow money from the FED.

Bonds and securities- Federal fund rate at which banks borrow money from each other.