Unit 4: (3/19/2015)

Monetary and Fiscal policy

Fiscal policy
-Congress and president controls
-Tax on spend

Monetary policy
-FED
-OMO (open market operation)
-discount rate
-federal fund rate
-reserve requirement

Tools of monetary policy

	Expansionary (easy money)	Contractionary (tight money)
Open market operation	Buy bonds Increase money supply	Sell bonds Decrease money supply
Discount rate	Decrease	Increase
Reserve requirement	Decrease	Increase

bank reserves and money supply have a direct relationship

federal find rate - interest rate that commercial banks charge each other for over night loans. 

Prime rate - interest rates that banks charge to their most credit worthy customers.