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Monetary Policy

Monetary Policy. By: Nic Marino. Money Creation Process. Depository Institutions Commercial Banks, Savings and Loan Associations, Mutual Savings Banks, and Credit Unions. Commercial Banks. State Bank National Bank Member Banks. Federal Reserve. Est. 1913 by Congress Board of Governors

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Monetary Policy

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  1. Monetary Policy By: Nic Marino

  2. Money Creation Process • Depository Institutions • Commercial Banks, Savings and Loan Associations, Mutual Savings Banks, and Credit Unions

  3. Commercial Banks • State Bank • National Bank • Member Banks

  4. Federal Reserve • Est. 1913 by Congress • Board of Governors • 12 Federal Reserve Districts • Federal Open Market Committee • Duties • Assists in check clearing process • Supervises the operations of member banks • Acts as the Federal Government’s fiscal Agent

  5. Money Supply • Vault Cash • Required Reserves • Excess Reserves • Reserve Requirements • Open Market Operations • Bills, Notes, and Bonds

  6. Change in the Money Supply • ΔM = ΔR/r • Two Assumptions • Depository Institutions do not hold excess reserves • Public does not add to its holdings of cash

  7. The Feds Control of the Money Supply • Three Ways • Open Market Operations • Changing Reserve Requirements • Changing the Discount Rate

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