Money supply is the money circulating in the economy which is created by the FED, the depositors, and investors.
Each of the 12 Federal Reserve banks perform the following: a. clear checks; b. issue new currency; c. withdraw damaged currency from circulation; d. administer and make discount loans to banks in their districts; e. evaluate proposed mergers and applications for banks to expand their activities; f. act as intermediaries between the business community and the Fed; g. examine bank holding companies and state-chartered banks; h. collect data on local business conditions; i. use their staff of professional economist to research topics related to monetary policy (Mishkin 369- 370).
The money supply can be changed by increasing our deposits held by banks. This money creates a repercussion of effects in the economy when borrowed by companies who use this for their operations. Through the money multiplier, the invested money could increase employment an output more than its actual value.
(3.) You are appointed as the chair of FRB. Congratulations! Chair, economy is in recession what are the policy measures you will undertake to push GDP toward potential GDP What are the problems of implementing monetary policy in practice
Under an expansionary policy, the central bank must increase the money supply and lower the short- term interest rates. ...Show more