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Frequently Asked Questions about Monetary Policy Tools
What are monetary policy tools?
Monetary policy tools are tools that the Fed uses to ensure economic growth while controlling the supply of money and the aggregate demand in the economy.
Why are monetary policy tools important?
The importance of monetary policy tools comes from it directly having an impact on our daily lives. Effective use of monetary policy tools would help tackle inflation, reduce unemployment numbers and promote economic growth.
What are examples of monetary policy tools?
During the stock market collapse of October 19, 1987, for example, several Wall Street brokerage companies found themselves momentarily in need of capital to support the enormous volume of stock trading that was taking place at the time. The Fed lowered the discount rate and pledged to act as a source of liquidity to prevent the economy from collapsing
What are the uses of monetary policy tools?
The main uses of monetary policy tools are to promote price stability, economic growth, and stable long-term interest rates.
What are the types of monetary policy tools?
There are three main types of monetary policy tools including open market operations, reserve requirements, and discount rate.
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