Describe the three main tools the federal reserve uses to control the u. s. money supply, explain how they are used? Then explain how changes in the money supply affect the u. s. economy as a whole

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Sam Henry

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6 April, 08:47

Describe the three main tools the federal reserve uses to control the u. s. money supply, explain how they are used? Then explain how changes in the money supply affect the u. s. economy as a whole

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Emery Blevins · Answer 1

The main tools used by central bank to control money supply include reserve requirements, discount rate, open market operations. Reserve requirements are amounts that the banks are required to keep, discount rate is the rate at which it lends banks while open market operation are ways through which it controls liquidity by buying and selling of treasuries. Changes in money supply affect liquidity and the level of economic activity