Fed/Monetary ?

Question

Explain how the Fed uses reserve requirements, the discount rate, and open marklet operations to implement U.S monetary policy?

Answer 1

Your question needs pages and pages to respond. Here is the short answer:

Reserve Requirement:  Control over the amount of money available to be loaned out, thus controlling the exponential creation of the money supply from deposits.

Discount Rate:  The cost of new money from the fed.

Open Market:  The addition or removal of money from the economy.  Buying TNotes adds money to the economy. Selling Tnotes removes move from the economy.

Answer 2

These are the 3 tools which the fed use to control the money supply

reserver requirements- what percent of deposits banks have to hold as reserves-high requiremnet decreases the money supply

discount rate- how much the fed charges banks for loaning them money- the more they charge the less the money supply

open market operations- purchase or sell government bonds- purchasing gov bonds increases the money supply

Hope this helps,

SLYFOX