Respuesta :
The fed's choice of monetary policy strategy is adjusting the federal funds rate to best fulfill its dual mandate.
A central bank controls the money supply through monetary policy, which includes its actions and statements. Central banks utilize monetary policy to prevent inflation, reduce unemployment, and encourage reasonable long-term interest rates.
Liquidity is increased by monetary policy to support economic expansion. In order to stop inflation, it decreases liquidity. Interest rates, bank reserve requirements, and the quantity of government bonds that banks must keep are all factors used by central banks. The amount that banks can lend depends on all of these tools. In order to effectively accomplish its dual purpose, the Fed's chosen monetary policy technique is to modify the federal funds rate.
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