ECO100Y5 Chapter Notes - Chapter 25: Federal Funds Rate, Open Market Operation, Money Supply

• School: UTM
• Department: Economics
• Course: ECO100Y5
• Professor: Zachary Mahone

Document Summary

Role of the central bank, monetary policy tools, challenges in using monetary policy. A bank responsible for the management of a nation"s money supply that typically serves as a regulator of the banking system. Its primary responsibility is to maintain a stable & effective monetary system. Policies of the federal reserve system that affect the supply of money & credit. It"s intended to change the growth of the nation"s money supply to foster full employment, stable prices & a sound financial system. The fed has 4 tools to achieve these goals. The purchase & sale of treasury bonds by the federal reserve in the open market . To expand money supply, it buys treasury bonds from businesses, banks & individuals who own them. People sell their bonds to the fed in return for a check. Banks present those checks to the federal reserve. The federal reserve increases the banks" reserves by equivalent amounts.