ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Monetary policy involves the Federal Reserve raising interest rates and restraining the supply of money and credit in order to rein in inflation. The two major fiscal policy tools that the U.S. government uses to influence the nation’s economic activity are tax rates and government spending.

Detailed explanation-2: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations.

Detailed explanation-3: -Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.

Detailed explanation-4: -The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy. The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements.

Detailed explanation-5: -Central banks have four primary monetary tools for managing the money supply. These are the reserve requirement, open market operations, the discount rate, and interest on excess reserves. These tools can either help expand or contract economic growth.