Reference no: EM131704582

In times of recession when the unemployment rate is high and the GDP growth rate is low, the Federal Reserve, also known as the Fed, engages in expansionary monetary policy, also known as easy money policy. On the other hand, when the economy is experiencing high inflation rate, the Fed will engage in contractionary monetary policy, also known as tight money policy.

Open market operations, discount rate, and reserve ratios are the three fundamental tools of monetary policy define each of these tools, and clearly articulate how the Fed uses each of these tools in times of recession. You will also need to articulate how the Fed uses each of these tools in times of high inflation.