The phrase “printing money” tends to be tossed around in discussions about the money supply. How important is cash to the overall money supply? In our system the Federal Reserve Board has at least some control over the money supply. How are they related to the Federal government?
In reference to our book, money supply is the quantity of money available in the economy. The Federal Reserve is responsible for managing this money. The Fed has the power to increase or decrease the amount of cash in our money supply. Cash is one type of money supply. The Fed creates dollars and uses them to buy government bods from the public. The ten principles of economics states prices rise when the government prints too much money. In our system, the Federal Reserve Board has some control over the money supply and is related to the Federal government because it is responsible to ensure the health of the nation’s bank system.
What was the FRB’s latest change to the money supply? (This summer they targeted a .25 drop in the interest rates they watch.) Why did they make the change they did? Do you agree it was needed to either boost or slow the economy?
Current interest rates are at 1.25%, a drop in .50% from one month ago. The reason for this change is the current issue with COVID19. This virus is effecting the world, shutting down communities, and severely effecting the stock market. I do agree this was needed but I think more change will likely happen soon as this issue continues.
Principles of Macroeconomics Spring 2020 