What bureaucracy is responsible for monetary policy? How is monetary policy used to affect the economy?
What will be an ideal response?
Answer: An ideal response will:
1. Identify the key bureaucratic component of the monetary system, which is the Federal Reserve Board.
2. Explain the key measures the Federal Reserve Board can deploy to affect the money supply, including raising or lowering the discount rate, which affects the interest rates that banks offer to consumers.
3. Specify how raising or lowering the discount rate affects the money supply and economic growth.
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