Question

1. Select a Monetary Policy Tool and explain how the actions of the tool contract or expand the economy.  

2. Analyze how the Monetary Policy Tool meets the Role of the Federal Reserve.

3. How does the chosen Monetary Policy Tool impact you?

The one I choose for this was "Open Market Operstions"

Help pleae :)

Answer 1

Central banks have three main monetary policy tools for managing money supply. There are: (V) open market operations (a) Reserve mequiousnest (3). Discount crate. These tools can either help expand or contact economic growth. Monetary policies are aimed to control sinflation, Consumption, liquidity, growth Open market operations percations : open market operations are when central banks buy or sell securities. There are bought from country's private banks. When the central book buys securities, it adds cash to the bank's reserves. That gives them more money to lend, where the central bank sells the securities, it places them on the bank's balance sheets and reduces its cash holdings. The bank now has less to lend. A central bank buys securities when it wants expansionary monetarry policy. It sells them when it executes Contractionary monetary policy. Quantitative easing is open market operations on steroids. Beforre the recession, the us federal reserve maintained between $ 700- $ 800 billions of treasury notes on its balance sheet. It added on substracted to affect policy, but kept it within that range. Quantitative easing almost quintupled holdings of treasury notes and mortgage-backed securities to more than $4 trillion by 2014,