Question

1. Why do people hold money?

2. What are the tools of monetary policy and how can the Federal Reserve apply these in a recessionary environment?

Answer 1

1)Individuals hold cash since it is the most fluid resource and it is least demanding to purchase products and enterprises with cash.

2)Apparatuses of financial strategy are-

Government subsidize rate-it is the rate at which national bank loans cash to banks, influencing the cash supply

Open market activities it is the deal and buy of securities and securities by national bank.

Save prerequisite proportion it is the rate of stores which banks are required to hold.

In recessionary condition national bank needs to expand cash supply by utilizing money related apparatuses like, decline for possible later use prerequisite proportion, government finance rate of open market buys.