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Lemonade Loans

Witsooth · AP Macro 4.5 · Money Market
You are the Federal Reserve, running a lemonade stand.
Each customer is a borrower who needs one interest rate.

Move the reserve requirement and buy or sell bonds
to shift the money supply until the rate lands where they need it.

You only see the rate you hit once you serve. 🍋
Money Market
What you just did, in economic terms
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#001
BORROWER
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Rate
⚠ Inflation!
🎛️ Fed Controls
🏦 Reserve Req Neutral
▲ Raise (tight) Lower (loose) ▼
📜 Bonds Neutral
◄ Sell (tight) Buy (loose) ►
Raising reserves tightens · Lowering loosens
Selling bonds tightens · Buying loosens
📈 Money Market