Final answer:
The Federal Reserve requirements is not one of the three main policy tools used by the Federal Reserve. The correct tools are open market operations, required reserve ratios, and the discount rate.
Step-by-step explanation:
The tool not included in the three main policy tools the Federal Reserve uses to conduct monetary policy is Federal Reserve requirements. The three main tools are:
- Open market operations: The buying and selling of government bonds with banks, which is the most commonly used tool.
- Required reserve ratios (or reserve requirements): These dictate the level of reserves a bank must hold.
- Discount rate: The interest rate charged by the central bank on loans it gives to other commercial banks.
By using these tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks, thereby affecting the federal funds rate.