Monetary policy

Monetary policy is policy enacted by a government or government agency with the aim of controlling the money supply.

Federal Reserve Bank actions to influence the availability and cost of money and credit as a means of helping to promote high employment, economic growth, price stability, and a sustainable pattern of international transactions.

In the United States, monetary policy is made by the Federal Reserve Bank and operates using three main tools:

* The reserve ratio
* The discount rate
* Open-market operations

## Contents

* 1 The Reserve Ratio
* 2 The Discount Rate
* 3 Open-Market Operations
* 4 See also
* 5 References
* 6 Sources

## The Reserve Ratio[edit]

The reserve ratio is the ratio of money deposited in a bank that the bank is required to keep on hand. This amount of reserves is to ensure that banks can meet withdrawal demand and also prevents banks from becoming too leveraged.

## The Discount Rate[edit]

The discount rate is the rate at which the Federal Reserve Bank will lend money to individual banks. The Fed is a lender of last resort and banks generally meet reserve shortfalls by borrowing from other banks; borrowing from the Fed can be seen as a bellwether of insolvency.

## Open-Market Operations[edit]

The Fed's open-market committee can buy or sell Treasury Bonds to cause money to flow toward or away from the government. These sales or purchases are known as open-market operations.

## See also[edit]

* Quantitative easing \- QE1, QE2, QE3
* Inflation
* Federal Reserve Bank
* National debt
* Treasury bills
* Housing bubble
* Subprime loans
* Economic bubble
* Economic collapse
* Economic preparedness

## References[edit]

## Sources[edit]

http://usinfo.state.gov/products/pubs/oecon/chap12.htm

v • d • e

Economic Preparedness

Economic preparedness|

Savings • Fiscal conservatism

Economic collapse|

Inflation \- Agflation • Deflation • Stagflation • Hyperinflation • Zimbabwe • Weimar Republic • Argentina • Bank run

Economic history|

American economic history • Recession •Recovery Summer 2010 • Quantitative easing • American Recovery and Reinvestment Act of 2009 • Economic stimulus• Recession of 2008 • Financial Crisis of 2008 • Great Depression • Black Tuesday • Stock market crash of 1929 • Black Thursday • Panic of 1907• Panic of 1893 • Panic of 1837

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