Tools of the Federal Reserve (2024/25))

Front

The amount a lender charges to borrow money (expressed as a percentage)

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interest

Front

A rise in the cost of goods and services (seen as a decrease in the purchasing power of the dollar)

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inflation

Front

At the end of the day, inflation is caused by

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too much money in circulation

Front

The actions undertaken by a nation's central bank to control money supply and achieve sustainable economic growth; it can be broadly classified as either expansionary or contractionary.

Back

Monetary policy

Front

In a recession, the Fed

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increases the money supply

Front

In an expansion (as we near a peak) the Fed

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decreases the money supply

Front

If the Fed used tight money in a recession, would that make things better or worse?

Back

worse

Front

The interest rate the Fed charges commercial banks for loans

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Discount Rate

Front

Percentage of deposits that the Fed requires banks to hold back and not lend out

Back

Reserve Requirement Rate

Front

The buying or selling of short-term Treasury's (bonds) and other securities in the open market in order to influence the money supply, thus influencing short term interest rates

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open market operations