2. Objectives of Part IV
Part IV explores the conduct of monetary
policy by the Federal Reserve System and its
operational framework.
• Present a balance sheet of Federal Reserve
• Explain three tools of monetary policy
• Understand the multiple deposit creation
process as an integral part of conducting
monetary policy
• Present the tools-targets-goals framework
of conducting monetary policy and
difficulties faced by the Federal Reserve to
achieve its goals
3. Outline of Part IV
• Central Bank (Unit 21)
• Multiple Deposit Creation & Money Supply
(Unit 22)
• Conduct of Monetary Policy (Unit 23)
4. Analytical Framework in Part IV
Building blocks of conduct of monetary policy
• Balance sheet of Federal Reserve
• Monetary policy tools of the Federal
Reserve: open market operation, discount
window operation, and reserve requirement
• Multiple deposit creation process
• Tools-Targets-Goals framework of
conducting monetary policy
