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Which of the following are tools available to the Federal Reserve to influence the money supply
directly?
I. Discount rate
II. Excess reserves
III. Reserve requirement
IV. Open market operations
Which of the following are tools available to the Federal Reserve to influence the money supply
directly?
I. Discount rate
II. Excess reserves
III. Reserve requirement
IV. Open market operations
Solution
The Fed can't control inflation or influence output and employment directly. Instead, it affects
them indirectly by using the following three tools of monetary policy:
Using these three tools, the Federal Reserve influences the supply and demand for reserve
balances of commercial banks at the central bank, and in this way alters the federal funds rate.
Which of the following are tools available to the Federal Reserve to i.docx

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