Describe tools that the US Treasury and the Federal Reserve use to undertake restrictive monetary policy today (versus before the mortgage-debt crises).
Describe tools that the US Treasury and the Federal Reserve use to undertake restrictive
Monetary policy refers to the actions of the central monetary authority of a country to influence the money supply and loanable funds of a country. Money supply and amount of loanable funds available in a country at a certain point of time greatly affect prevailing interest rates and inflation rate, which in turn affects overall economic performance and exchange rate. The primary goals of employing monetary policy are stability in the price level (i.e. level of inflation), keeping unemployment as low as possible, and keeping output growth in harmony to its long-run output path.
The contractionary monetary policy implies the central bank will restrict the supply of money and real interest rate rises.
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