The phrase “printing money” tends to be tossed around in discussions about the money supply. How important is cash to the overall money supply? In our system the Federal Reserve Board has at least some control over the money supply. How are they related to the Federal government?
Cash is important in the money supply because it determines how much people have to spend in the economy. The Federal Reserve is related to the Federal government because it acts as the government’s bank. The Fed sells and buys bonds for the government and essentially controls how much money is in the system.
What was the FRB’s latest change to the money supply? (This summer they targeted a .25 drop in the interest rates they watch.) Why did they make the change they did? Do you agree it was needed to either boost or slow the economy?
They lowered the interest rate because they wanted to have more money in the money supply. It was needed to boost the economy because it gave people access to more money to use to but things.
My Journey into Macroeconomics 