Monetary Policy

This study guide covers monetary policy, focusing on the Federal Reserve's (Fed) tools and their impact on the economy. It explains expansionary and contractionary policies, their effects on aggregate demand (AD), and how they address recessionary and inflationary gaps. The guide also details the Fed's tools: the discount rate, reserve ratio, open market operations, and federal funds rate. Finally, it provides exam tips, practice questions, and emphasizes connecting monetary policy actions to AD/AS model and money market graphs.