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Topic: Business
Number of pages / Number of words: 5 / 1223
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If the spread is positive, banks will always borrow from other banks, this will have no effect on the money supply.

When economy is facing recession and unemployment, the Fed decides to buy securities, lower the reserve ratio or lower the discount rate. Excess reserves will increase the supply of money to rise...


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Excess reserves will increase the supply of money to rise. Lower interest rate will cause more investment spending while the aggregate demand, output and employment will increase real GDP to rise by the multiple of the increase in investment. These actions are called an easy money policy or expansionary monetary policy...


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