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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

List the three traditional tools that a central bank has for controlling the money supply.

To determine

The state: the traditional tools used by a central bank for controlling the supply of money.

Explanation

One of the most important functions of the Federal Reserve is to conduct the monetary policy of the nation. To achieve this, the central bank implements the following three traditional tools:

  1. Open Market Operations: It occurs at the time, when the central bank buys or sells U.S. treasury bonds with an intention to influence the level of interest and the quantity of bank reserves.
  2. Changing reserve requirements: This is another effective way to control money supply...

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