Monetary Policy

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Monetary Policy

  1. 1. Monetary Policy 1
  2. 2. What is monetary policy? changes to interest rates & money supply by the government in order to alter the economy 2
  3. 3. expansionary monetary policy • Increase money supply • Decrease interest rates 3
  4. 4. contractionary monetary policy • Decrease money supply • Increase interest rates 4
  5. 5. What is the purpose of monetary policies? In order to maintain “maximum” employment & “stable” prices 5
  6. 6. Why change interest rates? • raising or lowering interest rates affect people's and company’s demand for goods and services • allow user’s more ability to take out loans 6
  7. 7. Does the govt actually print more money? NO, increasing $ supply means that the Fed allows banks to lend more of its money to consumers 7
  8. 8. How does more loan power by banks help consumers? consumers have more money, making them feel wealthier, in turn stimulating spending 8

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