Federal Reserve Money Train Activity - Assignment Example

Scenario In 150 to 200 words, explain your reasoning for the way you are planning on using Reserve Requirements. Be sure to address the following: 1. How Reserve Requirements affect the economy2. How your action will affect economic growth3. Why it is important to increase economic growth4. Your rationale for the use of Reserve RequirementsAt the end of the game, you will be provided with this information to give to your instructor.Answer:Reserve requirements are important for adjusting the flow of money in the economy.

The reserve requirements can create and control inflation. The economy is very dependent on the ability of the government to control money that is going in and money that is coming out. My actions affect the economy since they reduce the rate of unemployment and keep the GDP at a stable level. Making sure the economy does not grow to fast or rapidly slow down is very important in creating stability. It is necessary to increase economic growth at a rate that allows banks to lend affordable rates and reserves to hold enough money to prevent high inflation.

Scenario 2In 150 to 200 words, explain your reasoning for the way you are planning on using the Discount Rate. Be sure to address the following :1. How the Discount Rate can affect the economy2. How your action will affect economic growth3. Why it is important to slow economic growth4. Your rationale for the use of the Discount RateAt the end of the game, you will be provided with this information to give to your instructor.Answer:The discount rate has its many affects on the economy. The discount rate will determine if the Federal Reserve is going to allow banks to lend at higher or lower rates.

Deciding to raise the discount rate will increase overall lending rates and slow down the rate at which consumers are buying. If fewer loans are taken out it is likely that spending is also less. This is important to slow economic growth to prevent inflation, low unemployment rates and too high of a GDP. Discount rates are truly a large participator when it comes to the government’s role of increasing or decreasing economy growth.Scenario 3In 150 to 200 words, explain your reasoning for the way you are planning on using Open Market Operations.

Be sure to address the following :1. How Open Market Operations affect the economy2. How your action will affect economic growth3. Why it is important to increase economic growth4. Your rationale for the use of Open Market OperationsAt the end of the game, you will be provided with this information to give to your instructor.Answer:Open market operations affect the economy as they control whether or not bonds are to be made more or less available. The purchasing of bonds will allow for less money for the government.

Selling bonds will allow for more money for the government. Deciding to sell bonds will allow for an increase in economic growth as it will allow more available in the economy. Buying bonds will minimize what is in the economy and cause the economy to shrink. The use of open market operations depends on the size the economy needs to be in order to be successful and grow at the appropriate rate.