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economics

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The Fed is organized as a corporation, owned by its member banks, and directed by a government-appointed board. Monetary policy affects the size of the money supply and the level of interest rates. The first "tool" of monetary policy—and the one used least often—is a change in the reserve requirement. The second and most popular and powerful tool of monetary policy is open market operations. A change in the discount rate is the third major tool. The Federal Reserve has other responsibilities as well. These include maintaining the money supply and the payments system, regulating and supervising banks, preparing consumer legislation, and serving as the federal government's bank.

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