SECTION II

All these factors in turn affect the amount of money in the economy:

A change in the reserve requirement changes the amount of money that can be used for loans. (EX: if the reserve amount is increased, then less money will be available for loans.) This will decrease the demand for products, decrease unemployment- a recession.

Loaning money to failing banks prevents everyone from withdrawing their money at the same time.

The Federal Reserve can buy and sell bonds. Selling bonds takes money out of the economy because buyers take money out of banks to pay for these bonds. Buying bonds put money back into the banks and makes more money available for loans.