monetary policy tools

Monetary policy tools are methods used by central banks, like the Federal Reserve, to manage a country's economy. Key tools include adjusting interest rates, which influences borrowing and spending; open market operations, buying or selling government bonds to control money supply; and reserve requirements, determining how much money banks must hold in reserve. By using these tools, central banks aim to promote stable prices, full employment, and economic growth. Essentially, they influence how much money is available in the economy and how easily it moves to create a balanced economic environment.