ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Required Reserves
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Interest on Reserves
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Discount Rate
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Open Market Operations
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Detailed explanation-1: -The Fed has traditionally used three tools to conduct monetary policy: reserve requirements, the discount rate, and open market operations.
Detailed explanation-2: -The federal discount rate is the interest rate the Federal Reserve (Fed) charges banks to borrow funds from a Federal Reserve bank. The Fed discount rate is set by the Fed’s board of governors, and can be adjusted up or down as a tool of monetary policy.
Detailed explanation-3: -The interest rate on reserve balances (IORB rate) is determined by the Board and is an important tool for the Federal Reserve’s conduct of monetary policy.
Detailed explanation-4: -As of 2008, the Federal Reserve pays banks an interest rate on these excess reserves. The interest rate on excess reserves is now being used in coordination with the fed funds rate to encourage bank behavior that supports the Federal Reserve’s targets.