ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Fed has three major tools that it can use to affect the money supply. These tools are 1) changing reserve requirements; 2) changing the discount rate; and 3) open market operations. The book discusses these tools of monetary policy on pages 389-395.

Detailed explanation-2: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations. In 2008, the Fed added paying interest on reserve balances held at Reserve Banks to its monetary policy toolkit.

Detailed explanation-3: -Four Tools Banks Use to Control the World Economy Central banks have four main monetary policy tools: the reserve requirement, open market operations, the discount rate, and interest on reserves.

Detailed explanation-4: -Monetary policy is a set of tools used by a nation’s central bank to control the overall money supply and promote economic growth and employ strategies such as revising interest rates and changing bank reserve requirements.