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Chapter 16 Monetary Policy Tools

Chapter Objectives

By the end of this chapter, students should be able to:

  1. List and assess the strengths and weaknesses of the three primary monetary policy tools that central banks have at their disposal.
  2. Describe the federal funds market and explain its importance.
  3. Explain how the Fed influences the equilibrium fed funds rate to move toward its target rate.
  4. Explain the purpose of the Fed’s discount window and other lending facilities.
  5. Compare and contrast the monetary policy tools of central banks worldwide to those of the Fed.