Monetary Policy Notes

Question 1

What is Monetary Policy?

Answer 1

The actions taken by a country’s bank to manage the money supply, and brings that country out of a depression or inflationary time period.

Question 2

What is the Federal Reserve?

Answer 2

a national system of banks that control the money supply and economy.

Question 3

What are some of the federal reserve board governors, and what do they do? How many are there?

Answer 3

There are 7 members, including a chairman appointed by the president. They establish our national monetary policy.

Question 4

Why is a chairman appointed and not elected?

Answer 4

so that they can make unpopular decisions about the economy without worrying about being re-elected.

Question 5

What does the Federal Reserve do?

Answer 5

Maintains a checking account, sells and redeems government bonds, and issues currency.

Question 6

What does the Federal Reserve do? (continued)

Answer 6

Transfers money when checks are written, supervises lending practices, and borrows funds from the fed in case of emergency.

Question 7

How does monetary policy work?

Answer 7

By adjusting the supply of money in the nation, the Fed can speed up the economy
or slow it down.

Question 8

How does the FED stop inflation?

Answer 8

They discourage people from spending money by decreasing the money supply.

Question 9

How does the FED get out of a recession/depression?

Answer 9

They encourage people to spend money instead by increasing the money supply.