Unit 4 - Monetary Policy

March 19, 2015

Tools of monetary policy

• Open Market Operation (OMO)
• Discount Rate
• Reserver Requirement

Fiscal policy

• Congress & President
• Tax and spending

Monetary policy

• The Fed (Federal Reserve Bank)
• OMO
• Discount Rate
• Federal Fund Rate
• Reserve Requirement

Discount rate: It is the interest rate that the fed charge commercial banks for borrowing money.

Federal Fund Rate: Interest rate that commercial banks charge one another for a over night loan.

Prime rate: Interest rate that banks charge their most credit worthy customers.