Grantham ECN206 2023 January Week 7 Discussion Latest

ECN206 Macroeconomics

Week 7 Discussion

The Federal Reserve System

Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be 75-150 words in length, and is due on Sunday. By Tuesday, you should respond to two additional posts from your peers.

The Federal Reserve System was established to provide a stable monetary system for the entire economy.  The Federal Reserve Bank (the Fed) has three major tools to control the money supply: 1) reserve requirements, 2) discount window for loans to member banks, and 3) open market operations.

When the economy is in a recessionary mode, what will likely be the actions by the Federal Reserve using monetary policy?  Suppose the Federal Reserve purchases a $100,000 bond from John Doe, who deposits the proceeds in the Manufacturer's National Bank; what will be the impact of this transaction on the supply of money?How do each of the Fed's tools work?  What is the fractional reserve system, and how does it work in relation to the Fed?  Review the Federal Reserve System and how the Fed alters the monetary base to achieve the levels of money supply in the economy.