What is the role of the Fed in managing the money supply?
The Federal Reserve System (Ch. 14, p. 278-287)
Unit V: Money & the Fed
Name:
Key Question for the Money Supply:
Fed: Structure & Function
The Fed’s Answer:


Fed BUYS bonds
Fed SELLS bonds


Bond (defined): Not 007, but…
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
Calculate the Yield on James’ Bond:
Calculate the Yield on Tiffany’s Bond:
Bond Yield:
Bonds and Fed Tool #3: Open Market Operations
Fed’s Toolbox in Practice:
Purpose of Open Market Activity:
Increase the Money Supply

Fed Sells its Bonds __________________  ________________
o
o

Fed Buys more Bonds ________________  ________________
o
o
Impact on Federal Funds Rate:
 If FMOC buys bonds (increasing MS)____________________

If FMOC sells bonds (decreasing MS) ___________________
Decrease the Money Supply