Question

a.) Who or what creates monetary policy?

b.) What are two tools of monetary policy?


write as an 11th gradeer would thank you. not too fomal or informal. Keep it short as possible. Thank you kindly!

Answer 1

a) Monetary policy is made by a country’s central bank (in the U.S. that’s the Federal Reserve). They decide how much money should be in the economy and set key interest rates.

b) Two tools:
1. Open market operations — buying or selling government bonds to increase or decrease the money supply.
2. Changing interest rates (like the discount rate or the fed funds target) — raising rates slows borrowing, lowering rates encourages it.