How does the U.S. central bank conduct monetary policy? What are the principal tools and the most important tool that the central bank has to conduct monetary policy? Showing the simple balance sheet of the Fed, (2 assets and 2 liabilities), show how these tools can work, especially how would the Fed conduct and easy or expansionary money policy using the /Fed Funds market? Using both the loanable funds and the money market show the likely impact of the easy money on interest rates and the macro economy. What would a tight money policy look like?