Question

1) What steps were taken in 1913 to protect the federal reserve from political pressures?

2) Explain the process of Fractional Reserve Banking. (draw it out if needed)

3) List and explain the three tools of Monetary Policy: And describe how each would be used in (a.) Expansionary Monetary Policy (b.) concretionary policy
a.
b.
c.

4) What makes up the M1 and M2 Measurements?

Answer 1

Based on the information given, in order to prevent the federal reserve from pressure and stabilize the economy, the Federal Reserve Banks were given the ability to print money in order to ensure economic stability.

Fractional Reserve Banking.

It should be noted that the Fractional Reserve Banking refers to the banking system that allows the banks to keep a fraction of their money as reserves.

The main tools of the monetary policy include the open market operations, discount rates, and the reserve requirement. For a contractionary policy, the reserve requirement will be raised.

M1 definition of money includes coins, currency in circulation, checkable deposit, and traveler's check. M2 includes M1, saving deposit, certificate of deposit, money market funds, and other time deposits.

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