Describe the three main tools the Federal Reserve uses to control the U. S money supply

And 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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Carley Lawson

13 November, 12:47

Describe the three main tools the Federal Reserve uses to control the U. S money supply

And 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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George Vaughn · Answer 1

Answer: The three main tools the Federal Reserve uses to control de U. S money supply are: Reserve requirements, discount rate and open market operations.

Explanation:

Reserve requirements makes reference to the amount of cash banks should have in their vaults. Discount rate is the interest rate that is charged to commercial banks when they get loans from the Federal Reserve. Finally, open market operations means that the Federal Reserve buys and sells U. S treasury securities, they buy them to increase the supply of money and sell them to reduce it.

These changes in money supply have the capacity to affect liquidity and the level of economic activity as a whole in U. S economy.

Describe the three main tools the Federal Reserve uses to control the U. S money supplyAnd explain how they are used. Then explain how changes in the money supply affect the U. S economy as a whole

Describe the three main tools the Federal Reserve uses to control the U. S money supply

And explain how they are used. Then explain how changes in the money supply affect the U. S economy as a whole