WHAT YOUR GENERAL THOUGHTS ON THIS DISCUSSION POST A country’s money supply inversely affects its interest rates and for

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WHAT YOUR GENERAL THOUGHTS ON THIS DISCUSSION POST
A country’s money supply inversely affects its interest ratesand form of lifestyle for the citizens. When the money supply isample, the interest rates become lower, making it easier to takeloans and vice versa when the money supply reduces. Expansionarymonetary policies are economic changes that reduce interest ratesand encourage borrowing (León & González, 2022). Contrarily,the contractionary monetary policy increases interest rates anddiscourages borrowing. The federal reserve maintains equilibriumbetween the two monetary policies by raising or lowering interestrates. Since the central bank operates open markets, it can changethe supply curve of funds if they do not satisfy the federalreserve’s target. When the federal reserve predicts high inflationrates, they enact a contractionary monetary supply to normalize thecountry’s economic situation (León & González, 2022). Itreduces the aggregate demand by tightening the deployment of fundsand consumer spending.
The Federal Reserve uses reserve requirements, open marketoperations, and discount rates to manage the money supply. Thereserve requirement is the funds that banks must possess eitherstored in their repository or the central bank. When the reserverequirement is high, it reduces the money the bank can lend andthus is contractionary. Similarly, a low reserve requirement raisesthe funds the bank can lend through credit, making it expansionary.The open market is the securities traded by the central bank. Thecentral bank increases money in bank reserves by purchasingsecurities and lowers cash in bank reserves by selling securities(Ngandu, 2019). Discount rates apply to banks that take loans fromthe central bank at the federal fund rates.
The current actions of the Federal Reserve help mitigateinflation and unemployment by controlling the money supply.Although I agree with the Federal Reserve’s module, they are tooaggressive on the cost of credit and amiable when there are noeconomic fluctuations. The module will remain with loops unlessthey resolve the quantitative easing predicament.