Economic Instability and the Fed
Life is not always hunky-dory with the economy. Sometimes, bad things happen. Actually, it's a lot more frequently than sometimes... the proverbial crap is always hitting the fan, any time you turn on CNN. That's why most Americans just watch American Idol. Ugh.
At any rate, the Federal Reserve has a lot of power in their quest to keep the economy going strong. They also have the three tools of macroeconomic monetary policy:
At any rate, the Federal Reserve has a lot of power in their quest to keep the economy going strong. They also have the three tools of macroeconomic monetary policy:
- Open Market Operations: the ability to buy and see government bonds (treasury securities) on the open market to increase or decrease, as necessary, the money supply in the economy.
- Discount Rate: the ability to change the interest rate that the Fed charges banks on short term loans.
- Reserve Requirement: the ability to change what percentage of a bank's liabilities it is required to hold in reserve.