Monetary Policy

The Fed has several tools to manage the money supply by manipulating the excess reserves held by banks, a practice known as monetary policy

Fiscal Policy (Congress)

1. Tax
2. Spend

Monetary  Policy (FED)  
     1. OMO (open market operations) can either buy or sell bonds (security) 
     2. Required Reserves 
     3. Discount Rate  
               -Interest rate charges by the FED for overnight funds to commercial banks               -Doesn't charge money supply directly  
     4. Federal Funds Rate  
               -Interest rate charged by on commercial bank for overnight loans to another commercial                    bank
               -FOMC (committee) sets a federal funds rate and then uses open market operations to guide                the effected rate to the target rate