Macro Unit 3: Federal Reserve and Monetary policy study guide

Monetary policy
macroeconomic policy laid down by the central bank. It involves management of money supply and interest rate and is the demand side of economic policy.

Easy money policy
using tools to increase money supply

Tight money policy
using tools to decrease the money supply

Reserve requirement
percentage of deposits that banks must keep on reserve (not lent or invested)

Open market Operations
involves the buying and selling of U.S. govt. securities (bonds)

Discount Rate
Rate charged by the Fed to member of banks for loans

Prime Rate
Lowest rate of interest which money may be borrowed commercially

Federal Open Market Committee
Federal reserve board meets regularly to set monetary policy, including interests rates