This is “Monetary Policy Tools”, chapter 16 from the book Finance, Banking, and Money (v. 1.0). For details on it (including licensing), click here.

For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (8 MB) or just this chapter (238 KB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).

Has this book helped you? Consider passing it on:
Help Creative Commons
Creative Commons supports free culture from music to education. Their licenses helped make this book available to you.
Help a Public School
DonorsChoose.org helps people like you help teachers fund their classroom projects, from art supplies to books to calculators.

Chapter 16 Monetary Policy Tools

Chapter Objectives

By the end of this chapter, students should be able to:

  1. List and assess the strengths and weaknesses of the three primary monetary policy tools that central banks have at their disposal.
  2. Describe the federal funds market and explain its importance.
  3. Explain how the Fed influences the equilibrium fed funds rate to move toward its target rate.
  4. Explain the purpose of the Fed’s discount window and other lending facilities.
  5. Compare and contrast the monetary policy tools of central banks worldwide to those of the Fed.