The economy of the United States can be fine-tuned by the specific policies enacted by the Federal Reserve. To affect monetary policy, the Federal Reserve, also known as the Fed, utilizes a variety of instruments ranging from interest rate adjustments to controlling the money supply. As a means to stimulate growth, the Federal Reserve lowers interest rates, promoting the rate of incentivization and investment. On the other hand, high interest rates reduce inflation through expensive loans.
Furthermore, the Federal Reserve is also able to make use of open market operations, which includes the buying and selling of government securities so as to positively affect liquidity in the banking system. In recessions, the Fed is able to employ Q.E or Quantitative Easing, which is capable of adding money to the economy. All in all, these measures are directed towards achieving a maximum level of employment, a reasonable stablization of prices, and a moderate rate of interest in the long run which enables a sound economy.
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