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Explain How Central Bank Manages A Nation's Monetary System?

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The Federal Reserve has two tools. It can change the interest rates on the money it lends to banks. A higher interest rate makes money more expensive, thus discouraging banks to lend. Lowering interest rates causes the opposite effect. The second tool the Fed has is the power to change reserve requirements. A reserve requirement is the percentage banks must keep in there vaults of their total loan portfolio. Obviously, if the Fed lowers this requirement, the banks can increase their leverage and lend out more.
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Outline the stated direction of recent monetary policy in the united states
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The simple answer from school: There should always be the same amount of money around to by all goods and services produced in the economy. Amount of money around = GDP. That's hard to do, it is prefered (for various reasons) to have a little too much money that too little (=inflation)

In reality, it's a lot more complex. Money that exsists, but isn't used (savings in the pillow, simply put) should not be counted. Besides the money the central bank gives out, money gets created between the normal banks (you lend money from a bank (100$) and use it to buy something. Now you are in debt, but the guy you paied got the money from you. In the books, that means 100$ where added to the total amount of money).

There really is no simple answer to this question.

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