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All right, so monetary policy is a type of policy that is conducted to control the amount of money that's circulating the economy and how new money is added into the economy or taken out of the economy and through what channels that money flows.
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And so monetary policy, generally speaking, is conducted by a central bank.
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And the central bank of the united states is called the federal reserve, which you may have heard of.
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There are two main types of monetary policy.
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There's expansionary monetary policy in which the central bank or the federal reserve wants to add money to the economy to help pick things up.
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This would happen typically during a recession where they want to lower unemployment and aren't as concerned with the inflation rate.
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And there's contractionary monetary policy, which occurs when maybe the economy is heating up a bit too strong.
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And you're worried more about curbing inflation than combating unemployment, which, you know, you've heard a lot of talk about inflation lately, and so the fed has been considering some contractionary monetary policy.
01:08
So these are two main types.
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So when it comes to tools that the federal reserve can implement to actually implement monetary policy, first one is called open market operations.
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This is when the federal reserve buys or sells government securities like bonds from financial institutions to directly contribute.
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Or take away from the money supply in the country.
01:37
So when the government buys bonds, or sorry, not when the government, when the federal reserve, which is technically not part of the government, when they buy bonds, they're giving money directly to financial institutions and return for government securities, so this adds money to the money supply, and this expansionary...