5. Interestingly, in the very long run, the more advanced an economy, the more efficient it tends to become at using liquidity, and the more substitutes it invents. Think of credit cards and electronic payments (even though ultimately, behind these payment transfers, lie dollars).

6. This is known as an “open market” operation. Not all operations are in the open market. For example, the Fed also makes direct (“discount window”) loans to banks. In 2008, the Fed was granted a host of new open market and direct means of adding liquidity to the U.S. economy.

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