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    The Three Tools of Monetary Policy

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    What are the three tools of monetary policy?

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    The major monetary policy actions of the Federal Reserve are:

    a) Open market operations. The principal policy making body within the Federal Reserve System is the Federal Open Market Committee (FOMC) It meets in Washington about 8 times a year, and it issues a policy directive to the Federal Bank in New York, since New York is the center of the US financial system. Acting on the advice of this Committee, the Federal Reserve banks will purchase and sell US government securities - when securities are bought, the reserves of money that are available to depository institutions ...

    Solution Summary

    This is a description of the three tools used by the Federal Reserve to implement and influence monetary policy.