What Effects Does Monetary Policy Have?
(Continued from Page 1)Contractionary Monetary Policy As you can probably imagine, the effects of a contractionary monetary policy are precisely the opposite of an expansionary monetary policy. In the United States, when the Federal Open Market Committee wishes to decrease the money supply, it can do a combination of three things: • Sell securities on the open market, known as Open Market Operations • Raise the Federal Discount Rate • Raise Reserve Requirements These cause interest rates to rise, either directly or through the increase in the supply o