Recent economic data revealed an increase in a price level of greater than 7%. The target rate of annual increases in the price level or inflation is 2%. Explain the monetary policy tools available to the Federal Reserve to reduce inflation. Explain in theory how these tools will affect aggregate demand and therefore price level. Watch the CNBC video. CNBC commentator Ron Insana explains the practical limitations of monetary policy. List and explain the practical limitations of monetary policy discussed in the video.

https://www.youtube.com/watch?v=ioRSz03v_ms