Specifically, examine the three tools (reserve requirements, open market operations, and interest rates charged to banks -- federal funds and discount rates) it possess to control the money supply. Given our present economic situation, discuss how the Fed might best employ these tools.
Discuss the role the Federal Reserve, the Fed, plays in the US economy.?loan company
The Fed reduces the reserve requirement to make more money available. The Fed does open market operations to stimulate the economy, the Fed adjust the Fed funds rate to increase or decrease the interest rates.
The Fed best uses them in combination being visionary vs. reactionary.
Discuss the role the Federal Reserve, the Fed, plays in the US economy.?
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The Fed rarely changes reserve requirements (to do so would cause liquidity issues with banks); but they WILL utilize open market operations which changes the market interest rates.
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