The Federal Reserve System
Tools of Monetary Policy
1. Open Market Operations (OMO) — Most Important
2. Reserve Requirement (RRR)
3. Discount Rate
4. Federal Funds Rate (Target Rate)
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5. Interest on Reserves (IOR)
Tool Summary
Expansionary Monetary Policy (Easy Money)
Contractionary Monetary Policy (Tight Money)
Complete Policy Summary Table
Monetary Policy vs. Fiscal Policy
Limitations of Monetary Policy
1. Liquidity Trap
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2. Pushing on a String
3. Time Lags
Worked AP FRQ Example
AP Exam Tips
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Common Mistakes
Unit 4 topics
Unit 4 overview4.10Crowding Out4.1Financial Assets4.2Nominal vs. Real Interest Rates4.3Definition, Measurement, and Functions of Money4.4Banking and the Expansion of the Money Supply4.5The Money Market4.6Monetary Policy4.7The Loanable Funds Market4.8The Money Market and the Loanable Funds Market4.9Fiscal and Monetary Policy Actions in the Short Run