Question

Name one monetary policy, and specify the policy tool to use, that the Fed could make to help boost the economy.

Answer 1

Answer:

monetary policy: it is regulated by central bank of the country to maintain the economic stability and higher growth. the monetary policy helps in maintaining money supply which further helps in increasing GDP, employment and investment etc.

important monetary policies are : open market operations, bank or discount rate and required reserve ratios etc.

open market operation: buying or selling of government securities by central bank / federal reserve bank is called open market operation. when there is excess money supply or economy is facing inflation bank sell securities or bonds to the public to reduce money supply from the economy and brings economy to equilibrium. when there is shortage of money supply in the economy or economy is going through recession federal bank buy securities/ bonds from public to increase money supply in the economy it boosts economic activities by increasing investments, production and employment which leads to increase in GDP