ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Traditionally, the Fed’s most frequently used monetary policy tool was open market operations. This consisted of buying and selling U.S. government securities on the open market, with the aim of aligning the federal funds rate with a publicly announced target set by the FOMC.

Detailed explanation-2: -The Federal Reserve uses monetary policy to regulate the nation’s money supply. Monetary policy is directed at expanding or contracting the supply of money and credit in the U.S. economy.

Detailed explanation-3: -The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy. Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.