Monetary Policy

Question
What is open market operation?
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Slide 1: Slide
EconomieTertiary Education

This lesson contains 18 slides, with interactive quizzes and text slides.

Items in this lesson

Question
What is open market operation?

Slide 1 - Slide

Answer here

Slide 2 - Mind map

Chapter 16.1: Monetary Policy
Pages 490-497

Slide 3 - Slide

Objectives
Identify the key terms
Analyze the Fed's monetary tools
Discuss the effect of expansionary and contractionary policies


Slide 4 - Slide

​The federal funds
rate (FFR) is the  interest rate that banks  
charge one another to
borrow money.​
Open market
operations are the  sales and purchase of  
federal government
securities.


Slide 5 - Slide

The discount rate is
the interest rate that the  Fed charges when it lends  money to other banks.​
​The prime rate is 
the interest rate that  banks charge their best  
customers.​

Slide 6 - Slide

the interest rate that
banks charge their best
customers.​
the interest rate that the Fed charges when it lends money to other banks.​
 the interest rate that banks charge one another to borrow money.​
Federal Fund Reserve
Discount rate
Prime rate

Slide 7 - Drag question

Slide 8 - Slide

Why is it inaccurate to say that the Fed sets
the federal funds rate?

Slide 9 - Open question

What is the relationship between the discount
rate and the prime rate?

Slide 10 - Mind map

Answer
 (The prime rate tends to rise and fall as the discount rate does,
because banks charge their customers more than it costs them to borrow money from the Fed.)

Slide 11 - Slide

1.How should a contractionary monetary policy affect interest rates
and the rate of inflation? Why?
2.How should an expansionary monetary policy affect interest rates 
and the unemployment rate? Why?
3.How does the Fed use open market operations as a monetary policy
tool?


Slide 12 - Slide

Answer here

Slide 13 - Mind map

Answer
1. Interest rates will rise, inflation rate will fall.
Higher interest rates discourage lending, which
will decrease aggregate demand, slow GDP
growth, and lower general price level.​

Slide 14 - Slide

2.Interest rates will fall, unemployment will fall.
Lower interest rates encourage lending, which
will increase spending and investment, increase
aggregate demand, and speed GDP growth.​

Slide 15 - Slide

3.By buying and selling government securities the
Fed affects the amount of reserves in the bank​ing system, which in turn determines whether
the money supply will expand or contract

Slide 16 - Slide

___________________ is a plan to increase the amount of money in
circulation.
A
Tight money
B
Expansionary monetary policy
C
Monetary policy
D
Contractionary monetary policy

Slide 17 - Quiz

Write the main points of the lesson.

Slide 18 - Mind map