The tools of monetary policy are

Question

Quizplus · Accepted Answer

The tools of monetary policy are the ones that the central bank uses to influence the economy's money supply and interest rates. The Federal Reserve (the central bank of the United States) has three main tools of monetary policy: open market operations, the discount rate, and reserve requirements. Open market operations involve the purchase and sale of government securities by the Fed to increase or decrease the money supply. The discount rate is the interest rate at which depository institutions borrow funds from the Federal Reserve. Finally, reserve requirements are the amount of funds that banks must hold in reserve against deposits. Of the answer choices, only choice C includes all three of these tools.

The Tools of Monetary Policy Are