Average falls by nearly 400 points and the economy stalled. U.S. oil production could no longer keep pace with demand. U.S.: 5 percent of the world's population but uses 25 percent of oil consumption and 22 percent of carbon emissions. There was inflation and stagflation. What would you do if you were the leader of FRC and when did this happen in history?5.US experienced a severe recession. Europe returned to normal and reduced its purchases in America, and domestic demand for goods not available in wartime was filled. Prices fell, and unemployment exceeded 12%. What You Could Do....* The required reserve ratio: The percentage of its total deposits that a commercial bank must keep as reserves at the Federal Reserve. The amount of the requirement directly effects the amount of money that a commercial bank can lend to people. In other words, this changing of the reserve requirement can expands or reduces credit in every bank in the country. For increasing the money supply, the Fed would lower the required reserve ratio and vice versa. However the affect of this action would not take place less than two weeks. Therefore if the Fed want to control money supply from week to week, it will use open market operation instead. *The discount rate: The amount of interest rate that commercial banks need to pay to the Fed in order to borrow money from it. For increasing money supply, Fed will raise the discount rate, which will discourage commercial banks from borrowing money from the Fed. However, this tool cannot be used to control money supply when Fed is making a great precision is because the effects on the commercial banks 's demand for reserves are uncertain. *Open market operations. The most significant and often use tool that Fed use to control the money supply. For increasing the money supply, the Fed will perform a open market purchase of securities and vice versa.*Through the control of the money supply, the Fed affects the aggregat...
