The term "CONTROL" has to be qualified. For example, if the Fed wants to increase the supply of MONEY, it can simply have more money PRINTED (at the U.S. Mint). But that's unlikely because it would be the best way to make sure too many DOLLARS are CHASING too few goods.

Instead, the Fed tries to influence the amount of money through interest rates. Currently, the Fed "targets" the short-term interest rate called the federal funds rate. The idea is this: if the Fed can keep interest rates low, there will be more money in the economy, and if the Fed can send interest rates higher, there will be less money in the economy. This policy is supposed to work through bank lending. Banks will lend more money when interest rates are low (because the price of credit is lower) and less money when they are high (because the price of credit is higher).

The term "control" has to be qualified. For example, if the Fed wants to increase the supply of money, it can simply have more money printed (at the U.S. Mint). But that's unlikely because it would be the best way to make sure too many dollars are chasing too few goods.

Instead, the Fed tries to influence the amount of money through interest rates. Currently, the Fed "targets" the short-term interest rate called the federal funds rate. The idea is this: if the Fed can keep interest rates low, there will be more money in the economy, and if the Fed can send interest rates higher, there will be less money in the economy. This policy is supposed to work through bank lending. Banks will lend more money when interest rates are low (because the price of credit is lower) and less money when they are high (because the price of credit is higher).