How can the Federal reserve influence banks? willingness to expand or contract the money supply?

Question

How can the Federal reserve influence banks? willingness to expand or contract the money supply?

Answer 1

The Federal Reserve has 3 ways or tools to influence monetary policy. the first and most used is open-market operations. This is the daily buying and selling of US Treasury bills,notes, and bonds. The second is the discount funds rate or the interest rates paid by member banks when they borrow at the Federal Reserve Bank in their district.Lastly, and the least often used is to change banks reserve requirement. This requires banks to keep more cash on deposit with the Fed and thus there is less to loan, reducing the money supply. This is like the atom bomb of finance and a last resort.