AP macroeconomics part 4 video response

The Fed has 3 tools to change money supply. This was the graph represented:

	Expansionary (Easy money)	Contractionary (Tight money)
Required Reserves	Lower	Raise
Discount Rate (rate at which banks can borrow money from the Fed)	Lower	Raise
Buy/Sell bonds/securities (FOMC)	Buy (buy bonds = big bucks)	Sell

The federal funds rate is rate at which banks borrow money from each other. When the Fed is buying bonds it puts downward pressure on the federal funds rate, while when the Fed is selling bonds it puts upward pressure on the federal funds rate.