9 - The Instruments of Monetary Policy

Abstract

The goal of monetary policy is to estabhsh and maintain monetary and credit conditions consistent with a healthy economy. Federal Reserve authorities believe that a healthy economy is characterized by high employment, a good and sustainable rate of economic growth, price level stability, and a reasonably stable value for the dollar in terms of foreign currencies. The Fed tries to manipulate the money supply and credit conditions to achieve some or all of these goals. The tools it uses to influence monetary and credit conditions are called the instruments of monetary policy.