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The Fed also uses a certain amount of reverse repo (click to select) to borrow money from commercial banks rather than retain ownership of securities that are permanently transferred to meet its goals. You may also choose to effectively lend money (click to select).
Buying and selling government securities through the federal open market committee (FOMC) is the fed's most commonly used tool.
The federal reserve primarily uses open market operations to manipulate the money supply. fractional reserve banking is a system that requires banks to hold cash based on a percentage of loans.
The federal reserve can increase the money supply by cutting bank reserve requirements. this allows banks to lend more money. conversely, by raising bank reserves, the fed can reduce the money supply.
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