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- Good morning students, today we are going to lean about Monetary and fiscal policy.
- I know that the Federal reserve is in charge of the Monetary Policy
- The Monetary Policy refers to actions central banks take to porsue objectives such as price stability and maximum employment.
- The Fiscal policy refers to the government's revenue collection and spending decisions (congress and administration)
- yes, and the Fiscal policy decitions are determined by the Congress and the Administration.
- 3 Main Monetary Policy Tools
- Reserve requirements: is the amount of funds that a bank holds in reserve to ensure that it is able to meet liabilities in case of sudden withdrawals .
- Good job students!!Now I'm going to teach you the 3 Main Monetary Policy Tools that are in the board.
- In the Open market operations, central banks bull and sell bonds to regulate the money supply in the economy
- Discount rate: is the minimum interest rate set by the federal reserve for lending to other banks
- What impact would the Fed’s increasing interest rates have on loans?
- How would a higher interest rate impact economic growth?
- Business and consumers will cut back on spending
- When the Fed increases interest rates, it becomes more expensive to borrow money. It means higher rates for credit cards, auto loans, and any industry that relies on financing.
- Spending and Taxes are the Two Fiscal Policy tools
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