Money Supply Shifters (2 of 2)- Macro Topic 4.5

Mr. Clifford introduces monetary policy, focusing on the money market graph and three key shifters of money supply: open market operations, the discount rate, and reserve requirements. Open market operations involve the Fed buying or selling government bonds to influence the money supply. The discount rate is the interest rate the Fed charges banks, affecting borrowing costs and money supply. Reserve requirements dictate the percentage of deposits banks must hold, impacting their ability to loan money. The video concludes with a recap of how these tools affect interest rates and aggregate demand.

Describe the reserve requirement and its impact on banks' ability to loan money.

How can the Federal Reserve change the money supply?