https://www.youtube.com/watch?v=XJFrPI8lLzQ&feature=bf_next&list=PL2CB281D126F65E26&lf=results_video
The Fed's Tools of Money Policy
The Fed uses 3 tools for monetary Policy that are split into 2 sections (Expansionary or Easy Money and Contractionary Money or Tight Money). Where Expansionary money is used to increase the money supply to counteract depression and Contractionary is used to decrease the money supply to counteract inflation. The three tools that the Fed then uses is RR aka the Reserve Requirement which is the percentage of money that banks are required to hold, the Discount Rate which is the rate of interest the Fed charges when banks borrow money from them, and the Buying and Selling of Government Bonds and Securities which is basically the buying and selling of bonds to the public/banks. However they mainly use the Buying and Selling of Bonds as the other two tools can be easily countered by the bank refusing to follow them. This is mainly controlled by the FOMC or the Federal Open Market Committee which you hear about on the news.
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