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What are the three tools of Monetary Policy?

A. Change the reserve requirement, change the discount rate, conduct OMO

B. Hammer, screwdriver, drill

C. Change taxes, change government spending, change both at the same time

D. Print money, buy and sell bonds, adjust the interest rate

Answer :

The three tools of monetary policy are a) change the reserve requirement, change the discount rate, and conducting Open Market Operations (OMO).

The three tools of monetary policy used by a central bank are open market operations (OMO), changing the reserve requirements, and changing the discount rate. OMO involves buying and selling government bonds, impacting the level of reserves banks have at their disposal.

Lastly, the discount rate is the interest rate charged to commercial banks for loans they take from the central bank, which directly affects borrowing costs and, indirectly, the broader economy.

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