Federal Reserve
The Federal Reserve can change the money supply by changing the size of the monetary base, which directly changes the total amount of money circulating in the economy. The central bank would buy and sell bonds in exchange for hard currency. Then when the central bank disburses or collects the currency payment, it alters the amount of currency in the economy, thus altering the monetary base (Wikipedia, 2005).
Monetary policy can be implemented by changing the proportion of total assets that banks must hold in reserve with the central bank. Banks only maintain a small portion of their assets as cash available for immediate withdrawal. The rest is invested in illiquid assets, such as mortgages and loans. By changing the proportion of total assets to be held as liquid cash, the Federal Reserve changes the availability of funds that can be loaned. This acts as a change in the money supply.
Monetary authorities in different nations have differing levels of control of economy-wide......
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