What Are the Techniques Available to the Federal Reserve to Alter

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The Answer is The Federal Reserve has three means of altering the money supply.The first is open market operations,wherein the Fed buys or sells bonds on the open market.Buying bonds puts money into circulation,while selling bonds removes it.Quantitative easing involves open market operations that target certain markets,such as the housing market.The advantage is that this can help boost the money supply more directly in specifically ailing markets.The second option is to change the required reserve ratio.Lowering the amount of money banks are required to hold in reserve allows more money to circulate and,through the money multiplier effect,can dramatically increase the money supply.The third option is to change the discount rate,the interest rate at which the Fed lends money to private banks.Decreasing the discount rate encourages borrowing by banks and thereby increases the money supply.

What Are the Techniques Available to the Federal Reserve to Alter

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