The Fed uses a variety of monetary policy tools to reduce unemployment rates and boost prices in order to help achieve this during recessions. These instruments include reserve regulation, discount lending, open market asset purchases, and forward guidance to control market expectations.
By exchanging the bonds for cash when it buys bonds on the open market, the Fed increases the quantity of money that is available to the general people. In contrast, the money supply is decreased when the Fed sells bonds because it removes money from circulation in exchange for the bonds.
In order to execute monetary policy, the Federal Reserve employs its policy tools to influence the cost and availability of credit in the economy, which in turn influences employment and inflation.
Thus, The Fed uses a variety of monetary policy tools to reduce unemployment rates.
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