The Federal Reserve faces difficulties in precisely regulating the money supply as a result of the fractional reserve system because of a multiplier effect. Banks only need to retain a small portion of deposits as reserves when they make loans. This implies that a bank can create fresh money in the form of loans by lending out a portion of a deposit that it receives. The freshly created money is put into other banks, which subsequently lend some of it out, creating a multiplier effect. This process continues. Second, there's a chance that deposits will leave the system, especially in times of panic or unstable finances. This could jeopardize the stability of the money supply. The money supply may decline if depositors lose faith in a bank and take their money in large quantities. In order to cover the withdrawals, banks may have to call in loans or liquidate assets. This volatility may make it more difficult for the Fed to keep monetary conditions steady. The Federal Reserve can take a number of actions, including Open Market Operations, to resolve these issues and preserve control over the money supply. In order to affect bank reserves and the amount of money