what are the tools the Federal Reserve uses to control monetary policies. Expand on how the Federal Reserve System uses the interest rate to affect the money supply.
Monetary Policy and Interest Rate
Monetary policy refers to the policy which is enforced by the central bank of the country to control the money supply and economic development of the country. The main aim of monetary policy is to manage inflation, consumption, and growth of the economy. The central bank influences interest rates to manage the money supply. In monetary policy, the central bank may revise the interest rate to increase and decrease the flow of money.
Development of the US Monetary System
The monetary system of a country refers to the system in which a government provides money in the economy of the country. In the modern-day monetary system, usually it contains the National Treasury, the mint where the notes are being printed. The Central bank and the commercial banks regulate the money supply in the economy of a country.
what are the tools the Federal Reserve uses to control
Monetary policy is the tools and technique which is used by the government in order to control the demand and supply of money in the economy.
These monetary policies may be expansionary or contractionary.
An expansionary monetary policy objective is to increase the supply of money in the economy whereas contractionary policy aims to reduce the same.
In order to control the monetary policies there are various tools which is used by the Federal Reserve some of them are as follows:
Bank rate:
The rate at which Federal Reserve grant loans to others commercial banks in the economy is known as bank rate.
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