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Monetary Policy

Monetary policy is how the Federal Reserve achieves its primary objective, which is to manage inflation. Since the 2008 financial crisis, the nation's central bank also uses monetary policy to reduce unemployment. Find out why monetary policy is so effective, powerful and so often misunderstood.
  1. The Fed (24)

Monetary Policy
The Federal Reserve and monetary policy

Expansionary Monetary Policy
Understand exactly how expansionary monetary policy stimulates the economy out of recession.

Contractionary Monetary Policy
Examples of how the Fed uses contractionary monetary policy, and the tools it uses to implement it.

Restrictive Monetary Policy
How the Fed uses restrictive monetary policy.

Federal Reserve Tools and How They Work
A description of the important Federal Reserve tools, including Fed funds rate, open market operations, reserve requirements, the discount window and the money supply.

Reserve Requirement
The Federal reserve requirement mandates that banks keep a percentage of their deposits on hand each night.

Fed Funds
Fed funds are loans that banks make to each other to meet their reserve requirements.

The Federal Funds Rate and How It Works
How the Federal Reserve uses the Fed funds rate to regulate the economy, and why stock market analysts watch it like a hawk.

Open Market Operations
Open market operations is when the Fed buys or sells securities from its member banks. These operations are the mechanism the Fed uses to control the Fed funds rate. Chairman Bernanke boosted the operations dramatically with Quantitative Easing.

What Is Quantitative Easing?
The Federal Reserve's tool known as quantitative easing works by adding liquidity to the economy. The Fed does this by buying Treasuries and mortgage-backed securities.

What Is QE1?
QE1 was the Fed's first round of quantitative easing to combat the financial crisis of 2008.

Find out what was included in QE2, the Federal Reserve's second installment of quantitative easing, and why it was so important to spur the economy out of recession.

What Is QE3?
An explanation of QE3, or Federal Reserve's third round of quantitative easing.

What Is Operation Twist?
Operation Twist is a variation of the Fed's program of quantitative easing. The Fed buys long-term Treasury notes with the money it gets for selling short-term bills.

What Is QE4?
An explanation of QE4, the Federal Reserve's fourth installment of quantitative easing.

LIBOR Rate History
The historical LIBOR interest rate chart shows that LIBOR rates usually are close to the Fed Funds rate - except during the bank credit crisis of 2008.

What Is the Money Supply, and How Does It Affect the Economy?
The money supply is affected by monetary policy. It's measured by the Fed, but it is defined so narrowly it doesn't capture credit, the stock market or the bond market.

What Is the Gold Standard, and How Would a Return Affect the U.S. Economy?
What the gold standard is, the history of the gold standard, and why a return to the gold standard would adversely affect the U.S. economy.

What Is the History of the Gold Standard?
A brief history of the gold standard. When the U.S. went off the gold standard, and why.

The Federal Reserve and monetary policy

Types of Inflation
The Federal Reserve must develop monetary policy to fight all different types of inflation. Find out what they are, from hyperinflation to stagflation, and how you can protect yourself.

Hyperinflation is caused when the money supply is expanded, usually to pay for a war, at the same time the supply of goods is reduced.

Bretton Woods International Monetary System and 1944 Agreement
What was the Bretton Woods International Monetary System? How did it launch the U.S. dollar as the new world currency.

What Is an Economic Depression?
How expansive monetary policy and inflation targeting can prevent another depression. How contractionary monetary policy created the last depression.

What Is a Currency War?
Some critics accuse the Federal Reserve of trying to win a currency war by constantly devaluing the dollar.

Monetary Report
The Federal Reserve's semi-annual report to Congress on the state of the U.S. economy.

Janet Yellen
A biography of Federal Reserve Chairman Janet Yellen, and reasons why she'll make a good Fed chair.

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