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Maintaining price stability, full employment and economic growth are the goals of both fiscal policy and monetary policy. While fiscal policy consists of deliberate changes in government spending and tax collections, monetary policy addresses changes in the money supply to influence interest rates and the total level of spending in the economy (McConnell and Brue, 2004, p. 214, 268). There are pros and cons to each policy type, but overall, monetary policy can take effect in the U.S. economy faster. The Federal Reserve, consisting of 12 central banks, uses monetary policies in order to keep the national economies running as smoothly as possible. The Federal Reserve, or Fed, must use tools to control the money supply and thereby influence the economy. This paper will discuss the tools used by the Fed in monetary policy-making and how these tools influence money supply and macroeconomic factors. In addition, money creation will also be addressed, including how the creation of money......

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Approximate Word Count: 1277
Approximate Pages: 6 (250 words per double-spaced page)

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