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    The Federal Reserve's monetary policy tools

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    Describe the monetary policy tools the Federal Reserve uses to stabilize the economy and maintain price stability.

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    The Federal Reserve uses three main monetary policy tools. All are designed to change the money supply. If the money supply grows, GDP and inflation will increase. If the money supply shrinks, GDP and inflation will decrease.

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    Solution Summary

    This solution describes the three main monetary policy tools that the Federal Reserve uses to change the money supply.