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Federal Reserve 101
- 7. The interest that the Fed charges on these loans is known as the Discount Window Rate
- 8. The Fed directly controls the Discount Window Rate.
- 11. Banks are required by the Fed to keep a certain amount of their money in these reserves.
- 12. The Fed determines, and can change at any time, the specific proportion that banks must keep in reserves–the banks' Reserve Requirements .
- 17. In order to pay a bank, it need not print more money: it simply increases the recorded size of that bank's reserve.
- 25. The Fed sets a target for the federal funds rate and uses this as a guide to how much money it should take out of or put into the economy.
- 26. The Fed sets a lower target when it wants a looser monetary policy, and a higher target when it wants a tighter one.
- 28. When it is higher than they want it to be, they put more money into the economy.
- 29. When it is lower than they want it to be, they take more money out of the economy.
- 40. This work is licensed under a Creative Commons Attribution 3.0 United States License Presentation Created by Adam Gurri