MONETARY POLICY

Monetary Policy

Monetary Policy

Trade deficit

The trade deficit is when the value of imports is greater than the value of exports. If it crosses Customs and is intended to be sold in the U.S., it is an import. Imports are also services that are produced in a foreign country and sold to a U.S. resident.

Government Bonds

If the Fed buys treasury bonds in the open market, they pay for them with cash and receive bonds from investors or banks. The cash is deposited into banks and the money supply is increased. Similarly, if the Fed wants to raise interest rates, they will sell ...