What Are the Three Monetary Policy Tools of the Fed

question 81

Essay

What are the three monetary policy tools of the Fed? Briefly describe how each tool can be used to implement an expansionary monetary policy and a contractionary monetary policy.

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Definitions:

Functional Currency

The primary currency of the primary economic environment in which an entity operates, used in preparing its financial statements.

Dividends

Distributions by a company to its shareholders, consisting of a share of the company's profits.

Historical Rates

The exchange rates from past periods used for translating transactions in foreign currencies or financial statements of foreign operations.

Transaction Exposure

The potential risk of exchange rate movements affecting the value of a company's financial transactions denominated in foreign currencies.