Restrictive Monetary Policy

FED: Increases or Lowers

Excess Reserves:

FED Fund Rate:

Money Supply:

Interest Rate:

Investment Spending:

Aggregate Supply or Demand Shifts:

Left or Right:

End Result:

Expansionary Monetary Policy

FED: Increases or Lowers

Excess Reserves:

FED Fund Rate:

Money Supply:

Interest Rate:

Investment Spending:

Aggregate Supply or Demand Shifts:

Left or Right:

End Result:

EXPANSIONARY MONETARY POLICY *KNOW THIS** Problem: unemployment and recession Fed buys bonds, lowers reserve ratio, lowers the discount rate, or increases reserve auctions Excess reserves increase CAUSE-EFFECT CHAIN Federal funds rate falls Money supply rises Interest rate falls Investment spending increases Aggregate demand increases Real GDP rises 16-25Expansionary _Monetary Policy PROBLEM : (Please tell me the problem they are trying to correct or fix) FED: Increases or Lowers the |OR rate (circle one) Excess Reserves Fed Fund Rate Money Supply Interest Rate Investment Spending Aggregate Supply or Demand (Circle one) shifts left/right_(circle one) End Result :RESTRICTIVE MONETARY POLICY TAE WAONET *KNOW THIS* * Problem: inflation Fed sells bonds, increases reserve ratio, increases the discount rate, or decreases reserve auctions Excess reserves decrease Federal funds rate rises CAUSE-EFFECT CHAIN Money supply falls Interest rate rises Investment spending decreases Aggregate demand decreases Inflation declines 16-26Restrictive Monetary Policy PROBLEM : (Please tell me the problem they are trying to correct or fix) FED: Incr or Lowers the IOR rate (circle one) Excess Reserves Fed Fund Rate Money Supply Interest Rate Investment Spending Aggregate Supply or Demand (Circle one) shifts _left/right_(circle one) End Result