List and clearly explain the tools that the Federal Reserve System uses to achieve its macroeconomic objectives

The federal system uses various monetary policy tools to achieve macroeconomic objectives in the market. For instance, it uses the discount rate charged on commercial banks for obtaining short term loans. For example, lower rates will encourage borrowing by businesses and individuals hence increasing their consumption rate. Secondly is the reserve requirement, which includes the money held by banks and not loaned out to borrowers. For instance, the Fed can increase the reserve requirement reducing the money available to banks to lend to the people and businesses for their usage. The third tool is the open market operation, where the Fed can either buy or sell their securities when they need to raise cash or reduce spending in the market. The last tool is the interest on reserve held by banks as a requirement by the Fed. For instance, the Fed can decrease the interest on the money held over the excess reserve to encourage lending to the businesses and individuals in the market.