If the Federal Reserve Wants to Implement a Contractionary Monetary

question 72

Essay

If the Federal Reserve wants to implement a contractionary monetary policy, how would it use each of its four main tools for controlling the monetary base?

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Definitions:

Par Value

The face value of a bond or stock, representing the amount that the issuer agrees to pay at maturity or the nominal value of a share.

Shares Outstanding

The total number of shares of a corporation that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Tender Offer

An offer made directly to shareholders, proposing to purchase their shares at a specified price above market value.

Share Repurchase Program

A plan initiated by a company to buy back its own shares from the marketplace, often to reduce the supply of shares available and thus increase the value of remaining shares.