2007-02-27 08:23:14 · 6 answers · asked by styles4u 4 in Social Science ➔ Economics
The Fed regulates money availability by adjusting the interest rates at which banks can borrow funds.
This, in turn, causes the banks to adjust their own interest rates, thus regulating the amount of available capital for the economy.
When money is cheap, people and businesses borrow more, and are willing to take larger risks.
When money is more expensive, businesses and people do not borrow as much, and take smaller risks.
2007-02-27 08:28:31 · answer #1 · answered by jbtascam 5 · 0⤊ 0⤋
The Fed uses monetary policy in 3 possible ways:
(1) Open market operations, that is trying to get banks to buy their CDs to get money out of the system, or repurchasing CD to put money in the system.
(2) Moving the discount rate to make borrowing cheaper or more expensive.
(3) Jawboning. that is, talking about what they might do. Greenspan was usually very good at this, getting the economy to react without actually doing anything, just by giving out opinions about the direction he thought the economy has heading in.
2007-02-27 08:35:00 · answer #2 · answered by MSDC 4 · 0⤊ 0⤋
What's the Fed?
2007-02-27 08:27:19 · answer #3 · answered by Christopher A 3 · 0⤊ 0⤋
It's called the interest rate. Why do you think it's such a big deal. Lowering it puts dollars in people's pockets for spending, which is what people do, spend.
2007-02-27 08:29:37 · answer #4 · answered by jayndee13 4 · 0⤊ 0⤋
monetary
2007-02-27 08:26:02 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Corruption.
2007-02-27 08:30:44 · answer #6 · answered by Mighty C 5 · 0⤊ 0⤋