1. The Federal Reserve System
Tools for controlling the money supply

2. Reserve Requirement
Amount bank must hold in its vaults against the amount of checking account deposits
This amount is called the required reserves
It is expressed as a percentage
All additional reserves, called excess reserves can be used to make loans
Increasing the reserve requirement decreases the money supply
Decreasing the reserve requirement increases the money supply

3. Discount Rate
The interest rate charged by the Fed to lend money to banks
An increase in the discount rate results in a decrease in the money supply
Banks will borrow less and then have less to lend out
A decrease in the discount rate results in an increase in the money supply
Banks will borrow more and have more to lend out

4. Open Market Operations
Buying and selling government securities
Savings bonds
Treasury notes, bills, and bonds
Carried out by the New York Federal Reserve Bank
Buying = increased money supply
Selling = decreased money supply