Tomorrow we will be looking at the other policy option available to fill-in where Keynes falls short, or just doesn't work because of politics.
Monetary Policy - the tools of the Federal Reserve!
Some backstory - the Federal Reserve aims to keep inflation and unemployment in check (mainly inflation) since Paul Volker (a giant of a man) took on the stagflationary problems of the early 1980s. The Federal Reserve aimes to target the Federal Funds Rate - keep in mind they do NOT set the rate, only target the rate. They do this by adjusting the amount of money available to loan through the banking system (remember balance sheets). They have three tools to play with - changing the required reserve ratio, the discount rate, or using open market operations (the buying and selling of bonds).
So now you know, and knowing is half the battle ... get the other half tomorrow in class.
22 School Days till AP Test
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