Mindblown: a blog about philosophy.
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What is Economics?
The study of how limited resources are used to satisfy unlimited wants.
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Summary
15.1 The Federal Reserve Banking System and Central Banks The most prominent task of a central bank is to conduct monetary policy, which involves changes to interest rates and credit conditions, affecting the amount of borrowing and spending in an economy. Some prominent central banks around the world include the U.S. Federal Reserve, the European Central…
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Pitfalls for Monetary Policy
Learning Objectives By the end of this section, you will be able to: In the real world, effective monetary policy faces a number of significant hurdles. Monetary policy affects the economy only after a time lag that is typically long and of variable length. Remember, monetary policy involves a chain of events: the central bank must perceive…
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Monetary Policy and Economic Outcomes
Learning Objectives By the end of this section, you will be able to: A monetary policy that lowers interest rates and stimulates borrowing is an expansionary monetary policy or loose monetary policy. Conversely, a monetary policy that raises interest rates and reduces borrowing in the economy is a contractionary monetary policy or tight monetary policy. This module will discuss how expansionary…
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How a Central Bank Executes Monetary Policy
Learning Objectives By the end of this section, you will be able to: The Federal Reserve’s most important function is to conduct the nation’s monetary policy. Article I, Section 8 of the U.S. Constitution gives Congress the power “to coin money” and “to regulate the value thereof.” As part of the 1913 legislation that created the…
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Bank Regulation
Learning Objectives By the end of this section, you will be able to: A safe and stable national financial system is a critical concern of the Federal Reserve. The goal is not only to protect individuals’ savings, but to protect the integrity of the financial system itself. This esoteric task is usually behind the scenes, but…
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The Federal Reserve Banking System and Central Banks
Learning Objectives By the end of this section, you will be able to: In making decisions about the money supply, a central bank decides whether to raise or lower interest rates and, in this way, to influence macroeconomic policy, whose goal is low unemployment and low inflation. The central bank is also responsible for regulating all or part of the…
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Introduction to Monetary Policy and Bank Regulation
Figure 15.1 Marriner S. Eccles Federal Reserve Headquarters, Washington D.C. Some of the most influential decisions regarding monetary policy in the United States are made behind these doors. (Credit: modification of “Marriner S. Eccles Federal Reserve” by LunchboxLarry/Flickr Creative Commons, CC BY 2.0) Chapter Objectives In this chapter, you will learn about: Bring It Home The Problem of…
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Summary
14.1 Defining Money by Its Functions Money is what people in a society regularly use when purchasing or selling goods and services. If money were not available, people would need to barter with each other, meaning that each person would need to identify others with whom they have a double coincidence of wants—that is, each party…
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How Banks Create Money
Learning Objectives By the end of this section, you will be able to: Banks and money are intertwined. It is not just that most money is in the form of bank accounts. If banks choose to hold only limited reserves, the banking system can literally create money through the process of making loans. Let’s see…
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