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Monetary policy tools are used by currency boards, central banks, or even governments to
control currency supplies. Consumer access to cash, along with the interest rates charged by
lending institutions, create economic foundations for businesses to build upon. The tools used to
regulate those base needs dictate how much stability is found in the financial markets. There are
numerous ways for monetary policy tools to be used as a benefit to society. They maintain a
balance of value with currency exchanges, stabilize economies, and can even address debt or
unemployment issues.
The Federal Reserve is tasked with the implementation of monetary policy tools that promote
expansion or limit recession at the national level. Based on the rates they set, local banks and
credit unions create offers for their customers which encourage an expansion of borrowing.
People then purchase homes and vehicles, or use their credit cards, to generate economic
activities.
The advantages and disadvantages of monetary policy tools look at how these artificial structures
compare to what a natural free-market system would dictate for each person.
The advantages and disadvantages of monetary policy tools promote economic stability, which
then encourages growth. There aren’t guarantees with any tools like this, however, because
individuals are unpredictable. People can choose to do the opposite of what the tool anticipates,
creating unexpected outcomes which are sometimes damaging to society. There are those who
benefit and those who do not, but the goal of the tools is the same: to help the most people
possible with what they do.