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To control the money supply , three instruments are open market operations, the discount rate, and reserve requirements.
The Federal Reserve, the country's central bank, was established by the U.S. government to control the money supply and avert economic disasters.
Being the lender of last resort and enabling banks to borrow from the central bank when necessary is one of the key goals of the Federal Reserve.
In order to control the money supply and promote stable economic growth, the Fed primarily employs three instruments. The three tools are open market operations, discount rates, and reserve requirements.
Each of them has a unique effect on the money supply and can be used to either shrink or grow the economy.
The commercial banks borrow more money from the Fed when the discount rate is lower, which results in a rise in reserves and, consequently, the money supply
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