her words it is a minimum amount of money which a bank must keep on hand and is unable to lend out. By increasing the reserve requirement the Fed can lower the amount of money in the open market, and by decreasing the reserve requirement the Fed can increase the amount of money in the market place. This tool of monetary policy is listed as one of the least used tools. This tool is not used very often, when it is it usually signals a major shift in the direction of monetary policy.According to the information I obtained from the most recent report online from the Federal Reserve was dated July 18 2001. This report went into great detail on the state of the economy. The report stated that the economy as a whole was struggling yet stable. Consumer and business confidence was down which meant that people and businesses within our economy were not spending as much money as usual. The stock market also showed a dramatic drop which is not good for our economy. However the inflation rate looked good and was not increasing at an uncontrollable rate. The Federal Reserve took action to combat failing consumer and business confidence by making multiple decreases to the federal funds target rate. The most recent monetary policy is geared towards keeping inflation in check while trying to increase the gross domestic product (GDP). The Federal Reserve report stated the following:In these circumstances, the FOMC continues to believe that the risks are weighted toward conditions that may generate economic weakness in the foreseeable future. At the same time, the FOMC recognizes the importance of sustaining the environment of low inflation and well-anchored inflation expectations that enabled the Federal Reserve to react rapidly and forcefully to the slowing in real GDP growth over the past several quarters. When, as the FOMC expects, activity begins to firm, the Committee will continue to ensure that financial conditions remain consistent with...
