ECON 2030 Lecture : 4 22 Last Econ Notes
Document Summary
Key relationship: purchase: expansionary, sale: contractionary, discounting (frbs, bog, financial panics. The main tool that the fed uses to control mb is open market operations. Fomc is the body that controls open market operations: open market operations (fomc, omo involve the fed going to the market and buying and selling bonds. This changes the monetary base and changes interest rates: federal funds market, government bonds. Bond- a debt security that promises to make payments periodically for a specified period of time. Key relationship: inverse relationship between market price of a bond and its market rate of interest, two types of open market operations: purchases and sales, purchase: expansionary. More attractive/cheaper to borrow- borrow more- spend more more goods and services produced more gdp more economic activity more jobs. The fed buys bonds from the public. Mb increases (because currency in circulation increases) so the ms increases.
