Unit 4, Video 3 Summary

This video is over the Tools of Money Policy. There is expansionary which is easy money and contractionary which is tight money. To increase the money supply, reserve ratios(money held by banks) have to go down, along with the discount rate(rate a which banks can borrow money from FED). The opposite must happen to decrease the money supply(contraction). The most common thing banks do for either the creation or depletion of the money supply is buying or selling government bonds, respectively.