Introduction to Federal Reserve

Tools of the Federal Reserve

by PAMELA HUNT

Open Market Operations

​IN A RECESSION

​

​INCREASE THE MONEY SUPPLY

The Fed ​BUYS MORE BONDS

​

​

​DISCOUNT RATE

IN A RECESSION

​LOWER INTEREST RATE

TO STIMULATE BUYING

​RESERVE REQUIREMENT

​

IN A RECESSION

​LOWER THE RESERVE REQUIREMENT FOR BANKS TO KEEP MONEY ON HAND

Poll

What should the Federal Reserve do during a Recession? (Choose all that apply)

• Lower the interest rate

• decrease the money supply

• lower the reserve requirement

• raise the interest rate

​Open Market Operations

​

​IN AN EXPANSION (SURPLUS)

​

​DECREASE THE MONEY SUPPLY

​THE FED SELLS MORE BONDS

Poll

What should the Federal Reserve do during an expansion or surplus? (Choose all that apply).

• reduce the reserve requirement

• increase the money supply

• raise the interest rate

• sell bonds

​DISCOUNT RATE

​IN EXPANSION (SURPLUS)

​RAISE INTEREST RATES TO DECREASE THE

​MONEY SUPPLY

​RESERVE REQUIREMENT

​IN EXPANSION (SURPLUS)

​

​RAISE THE RESERVE REQUIREMENT TO

​REDUCE THE MONEY IN CIRCULATION