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- Describe the purpose of the Federal Reserve System.
- Name the three main tools used by the central bank.
- Provide examples of open market operations.
- Explain how the money supply is affected by the reserve ratio.
- Understand how banks borrow money from the Federal Reserve.
- Learn how the Federal Reserve can affect interest rates.
- Become familiar with the quantity theory of money.
- Explain how the velocity rate of money is determined.
- Compare and contrast real and nominal interest rates.
- Describe the relationship between private investment and real interest rates.
- Learn how the money supply is connected to rapidly increasing prices.
1. What is the Federal Reserve System?
Have you ever wondered why interest rates go up and down, seemingly at random? Of course you have! Discover what the Federal Reserve is, what its goals are and how those goals are achieved in this introductory lesson explaining the central bank of the United States.
2. Reserve Requirement, Open Market Operations and the Discount Rate
This lesson outlines the three main tools used by the central bank to conduct monetary policy, including open market operations, required reserves and the discount rate.
3. Open Market Operations & the Federal Reserve: Definition & Examples
This lesson explains the most frequently used monetary policy tool of the central bank, open market operations. Using examples, you'll go inside the formula of the money multiplier and see how the Federal Reserve effectively controls the interest rate of the economy.
4. How the Reserve Ratio Affects the Money Supply
Where does our supply of money come from. Well, it's in the hands of the Federal Reserve. In this lesson, discover how the central bank can dramatically alter the supply of money in the economy by changing the reserve requirements of the banks it oversees.
5. The Discount Rate & Monetary Policy: How Banks Can Borrow Money from the Federal Reserve
Learn more about the discount rate, which is the rate that banks pay to the central bank when borrowing money. This lesson explains how changes in the discount rate affect the money supply and how the central bank can use the discount rate as part of monetary policy.
6. How the Federal Reserve Changes the Money Supply and Affects Interest Rates
Discover the connection between the money supply and economic output and how the central bank's tools lead to an increase or decrease in real GDP via expansionary and contractionary monetary policy.
7. Quantity Theory of Money: Output and Prices
This lesson explains the quantity theory of money and how to apply it, including the idea that an increase in the money supply leads to inflation in the long run.
8. The Velocity of Money: Definition and Circulation Speed
Learn about the method economists use to measure how fast money changes hands throughout the economy, referred to as the velocity of money. With the help of an imaginative story, this lesson defines the concept of velocity as well as what determines it.
9. Real vs. Nominal Interest Rates and Changes in Prices
This lesson explains the important difference between nominal and real interest rates and provides examples of how to use the Fisher equation to adjust nominal rates for inflation.
10. Private Investment and Real Interest Rates
When you borrow money, where does that money come from and why is it available? In this lesson, you'll learn about the market for loanable funds, where savers deposit money and entrepreneurs borrow money to finance private investment.
11. Hyperinflation, Money Supply and the Consumer Price Index
Is there such a thing as too much money? Maybe. What happens when inflation is excessive? This lesson explores what hyperinflation is and how it is connected with the money supply.
12. What is Monetary Policy? - Definition, Role & Effects
National governments have a couple of tools they can use to steer an economy. Monetary policy is one of those tools. In this lesson, you'll learn what monetary policy is and discover its role and its effects. A short quiz follows the lesson.
13. World Economy: Definition & History
In this lesson we will explore the concept, history, and consequences of a world economy. We will learn why a healthy world economy is important and discuss major events that created the current world economy. The lesson will then conclude with a summary and a quiz.
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Other chapters within the College Macroeconomics: Tutoring Solution course
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- Measuring the Economy: Tutoring Solution
- Inflation Measurement and Adjustment: Tutoring Solution
- Understanding Unemployment: Tutoring Solution
- Aggregate Demand and Supply: Tutoring Solution
- Macroeconomic Equilibrium: Tutoring Solution
- Inflation and Unemployment: Tutoring Solution
- Economic Growth and Productivity: Tutoring Solution
- Money, Banking, and Financial Markets: Tutoring Solution
- Fiscal and Monetary Policies: Tutoring Solution
- Foreign Exchange and the Balance of Payments: Tutoring Solution
- Inflows, Outflows, and Restrictions: Tutoring Solution