Market operations as principal tool of monetary management

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Reference no: EM131088655

This question pertains to the tools of monetary policy

a) Why does the Fed use open market operations as its principal tool of monetary management, rather than changes in the required reserve ratios, or changes in the discount rate? (Hint: think about the matter of'' announcement effects''.

b) What are the differences in the effects that each technique would have on individual banks, on the commercial banking as a whole, and on the money supply?

Reference no: EM131088655

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