Money, Banking, and the Federal Reserve System - Discussion

Economics
Tutor: None Selected Time limit: 1 Day

The Federal Reserve may increase or decrease money supply depending on the economic condition. What is the difference between contractionary and expansionary monetary policy?

Please provide references also.

Jul 26th, 2015

Thank you for the opportunity to help you with your question!

Generally speaking contractionary monetary policies and expansionary monetary policies involve changing the level of the money supply in a country. Expansionary monetary policy is simply a policy which expands (increases) the supply of money, whereas contractionary monetary policy contracts (decreases) the supply of a country's currency.

In the United States, when the Federal open market committee wishes to increase the money supply, it can do a combination of three things:

  1. Purchase securities on the open market, known as open market operations
  2. Lower the Federal discount rate
  3. Lower Reserve requirements

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Jul 26th, 2015

Thank you for giving me opportunity to solve this question.

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Jul 26th, 2015

Thank you for the post.  What references did you use?

Jul 26th, 2015

I have used federal reservation. if you want to ask url of link ? let me know

Jul 26th, 2015

Yes the URL please?

Jul 26th, 2015

http://economics.about.com/cs/money/a/policy.htm... let me know if u have any question

Jul 26th, 2015

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Jul 26th, 2015
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