How would you respond to this answer? The FED has three ways to expand or contra

Question

How would you respond to this answer?

The FED has three ways to expand or contract money and credit. The first way would be for the FED to buy existing U.S. Treasury securities. They do this by using the equivalent of newly issued currency. What this does is it helps to expand the reserve base and the ability of banks to make loans and expand money and credit. The Fed can also change reserve requirements, which is the controlling portion of deposits that banks must hold as vault cash or on deposit at the FED. This affects the available liquidity within the market. Lastly the FED can permit certain banks to borrow from it directly on a temporary basis. This provides the banks with a temporary means for obtaining reserves. These loans are given a discount interest rate.

Explanation / Answer

The Federal Reserve has traditionally relied on three instruments to conduct monetary policy.
Each works by altering the reserves available to depository institutions. These institutions are
required to maintain reserves against their deposit liabilities, primarily checking, saving, and time
(CDs). These reserves can be held in the form of vault cash (currency) or as a deposit at the Fed.
The size of these reserves places a ceiling on the amount of deposits that financial institutions can
have outstanding, and deposit liabilities are related to the amount of assets these institutions can
acquire. These assets are often called

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