Needs to be 1500-2000 words WITHOUT questions in it! Needs to be done April 28th 8 pm CST

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According to the Federal Reserve's Federal Open Market Committee (2011), the Federal Reserve "controls the three tools of monetary policy—open market operations, the discount rate, and the reserve requirements."

It goes on to say that using these three tools, the Federal Reserve influences the demand for and supply of balances that depository institutions hold at the Federal Reserve Banks, and in this way, it alters the federal funds rate. The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight.

Changes in the federal funds rate trigger a chain of events that affect the following:

• Other short-term interest rates
• Foreign exchange rates
• Long-term interest rates
• The amount of money and credit in the system
• Employment
• Output
• Prices of goods and services (i.e., inflation)
• Investment