Monetary Policy Tools

Money Creation- The Federal Reserve puts money into circulation

Required Reserve Ratio (RRR)- the fraction of the deposit that must  be kept on reserve

Excess Reserves- reserves greater than the required amounts

Prime rate- the rate of interest that banks charge on short-term loans to their best customers

Open Market Operations- buying and selling of government securities to alter the supply of money

The  Federal Reserve does
-provides banking and fiscal services to the federal government

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