Content Standard 20: Fiscal and Monetary Policy
Grade 12 Benchmarks
7. Monetary policies are decisions by the Federal Reserve System that lead to changes in the supply of money, short term interest rates, and the availability of credit. Changes in the growth rate of the money supply can influence overall levels of spending, employment, and prices in the economy by inducing changes in the levels of personal and business investment spending.
9. The Federal Reserve targets the level of the federal funds rate, a short-term rate that banks charge one another for the use of excess funds. This target is largely reached by buying and selling existing government securities.
10. The Federal Reserve tends to increase interest rate targets when it feels the economy is growing too rapidly and/or the inflation rate is accelerating. It tends to lower rate targets when it wants to stimulate the short-term growth of the economy.

• The Great Inflation Online Module
• Economic Lowdown Audio Series—Monetary Policy
• The Fed’s New Monetary Policy Tools Online Module
• Monetary Policy Online Module