Controlling the monetary base through open market

Reference no: EM1314406

Explain how the central bank in a modern economy operates; in particular, how it tries to control the monetary base (H), and thus the quantity of money (M) via open-market operations targeting a specific "fed-funds" rate. What is the main difficulty in achieving the desired result (i.e. in predicting the ratio of M to H, the so-called "money multiplier")?

Reference no: EM1314406

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