StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Economics P3 Assignment - Essay Example

Comments (0) Cite this document
Summary
Economics Name Institution Economics More than often, the Federal State controls its economy through Federal Reserve as it influences its economy through monetary policy tools that include open market operations, the discount rate, and the reserve requirements…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER99% of users find it useful
Economics P3 Assignment
Read Text Preview

Extract of sample "Economics P3 Assignment"

Download file to see previous pages Short-Term Interest Rates In most cases, the Federal Reserve use either contractionary or expansionary money policy to influence the short-term interest rates of fund. In a contractionary period, there is a higher level of short-term interest rate as shown in the figure below this means that the banks will avoid borrowing money from the Federal Reserve banks as they keep their reserves at the authorized level. As a result, the banking institutions will change a higher rate as it lends less money out, because they are borrowing money at a higher rate thus, loans become expensive, and the economy slows down. In addition, the Federal Open Market Committee (FOMC) issue trading on the open market operations as it promises higher returns on interest rates reduces the quantity of money supply (Board of Governors of the Federal Reserve System, 2012). When the Fed uses the expansionary monetary policy, the interest rates fall leading to cheaper interests rates and banks consequently borrow more funds from the Federal Reserve banks to maintain their reserve requirement rate. At this point, the open market operations that were bought earlier from the Federal Open Market Committee (FOMC) are sold at a higher interest rate leading to increase in money supply in the economy. (Mankiw, 2012) Foreign Exchange Rates Just like, local exchange rates that are affected by the monetary policy tools, the foreign exchange rates are also affected. As a result, conventional monetary policy that are implemented by the Federal reserve has a greater influence on the exchange rate as foreign exchange interventions take place to control the economy's demand and supply of money (Board of Governors of the Federal Reserve System, 2012). As a result, contractionary monetary policy implementation by the Federal Reserve creates shocks in the economy, as it allows the foreign exchange rate to appreciate for a shorter period and thereafter, the exchange rate depreciates with time to its original level. Long-Term Interest Rates More than often, the Federal Reserve decision to use the tools of monetary policy affects long-term interest rates in the economy. Depending on Fed uses, contractionary and expansionary monetary policies the effects will be realized in the long-term interest rate (Board of Governors of the Federal Reserve System, 2012). With an increase in the discount rate, reserve requirement and open market operations, the long-term interest rates will increase over time. This is because, banking institutions will have less funds as compared their reserve requirement to lend out to its customers with the ever-increasing long-term interest rate. However, expansionary monetary rate increases the money supply as the interest rate reduces and increased credit is widely available leading to lower long-term interest rate. As a result, the demand for money increases leading to more investments. The Amount of Money and Credit in the System In most instances, the Federal Reserve uses the tools of monetary policy to influence the availability and cost of money and credit in its economy. As a way of tightening money supply and credit availability, the Federal Open Market Committee FOMC directs the New York stock exchange to sell government securities (Mankiw, 2012). As a result, it collects funds from the public and collect payments through the banks by reducing their reserve account in the main Federal Reserve Bank. In the end, banks have less money to lend to its customer ...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Economics P3 Assignment Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
Economics P3 Assignment Essay Example | Topics and Well Written Essays - 1250 words. Retrieved from https://studentshare.org/macro-microeconomics/1448695-eco
(Economics P3 Assignment Essay Example | Topics and Well Written Essays - 1250 Words)
Economics P3 Assignment Essay Example | Topics and Well Written Essays - 1250 Words. https://studentshare.org/macro-microeconomics/1448695-eco.
“Economics P3 Assignment Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/macro-microeconomics/1448695-eco.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Economics P3 Assignment

Financial Markets and Economics

As of the staff of the Indonesian mine, a thorough evaluation of the existing resources should be conducted regarding all levels of the working area (from the management team to the worker).
b. The acquisition should create a competitive advantage for TCC mainly for the following reasons: 1. This mine should be the first offshore production base for TCC, a fact that could help towards the reduction of the company’s dependence on domestic mines, 2. The transport of the material from the specific mine is easier due to the absence of issues like the rail or port bottleneck, 3. Currently, the mine has a positive performance with a tendency for more growth (an export authorization for 20% more tonnage was granted this year)...
12 Pages (3000 words) Assignment

International Business Economics

According to Adam Smith, the absolute advantage would be realised as long as the cost of production differed from between countries, one or both countries would gain by trading. An example to illustrate this is a situation where we have two countries A and B which produce two similar goods X and Y. The figures show labour cost in hours for producing one unit of a good

David Ricardo formulated the theory of comparative advantage and argued that even if one country is more productive in both lines of production it would be still profitable to trade. Country A is more productive in both lines of production but it will still be profitable to trade with country B, this is shown by first stating that country A is more advanta...
6 Pages (1500 words) Assignment

Business Economics: Small and Medium

The entry of small firms into the global markets has proven to be the main aspect of the creation of economies of scale. Markets are fast evolving to the needs of varied tastes and customer preferences, so necessary knowledge and technology asset has a major role to play for small firms to rise and to match up to the situation. However, small firms are characterized by “smallness of the market share (a large number of similar-sized firms) and hence lack of individual market power, corresponding to the theoretical concept of Pure Competition.” (Waite 1973. P. 154).

They need to overcome the handicap of smallness by strategic alliances and mergers with larger or technically more competent entities. Small firms...
10 Pages (2500 words) Assignment

Assumptions of Classical Economics which Do Green Critics

...What assumptions ical economics do green critics draw into question and what are the political consequences of the green approach?   Green economics is all about how economy is dependent on its natural surroundings and how it is a component of the natural world. It considers that the non-human things such as plants, the atmosphere and the earth sciences also have a direct relation to economics and are affected by economic deals and should be regarded as stakeholders. Green economics believes that everything which exists on the Earth has a connection with the rest of the species or nature. It believes that resources are limited and one can not extract uses from them unlimitedly. It also states that one cannot expand in a limited space...
8 Pages (2000 words) Assignment

Economics or Ethics

Several CEOs in America have in coalition with top managers deviated from the norms of corporate governance and caused immeasurable woes to the stakeholders. Using their power and ego they chased the wealth for personal gains without any concern for the shareholders or other stakeholders of the company. Enron, the world’s largest energy trader at one time, had to file bankruptcy under Chapter 11 when about 5000 workers lost their job (Bhattacharya, 2004). Arthur Anderson, one of the big five auditing firms was charged to have colluded with the management to misappropriate funds and project a picture different from the reality. Income was inflated and then all concerned papers were destroyed. The leadership at Enron was conce...
6 Pages (1500 words) Assignment

Real Estate Economics

...Real e economics: Introduction: The real e industry is engaged in leasing, renting, selling of real e and buying real e on behalfof others. The real estate industry comprises of the owners of the estates, the users who are the consumers, the developers who build, the renovators who refurbish buildings and the facilitators who enable sale of real estate, the facilitators comprises the financers example banks, the brokers and lawyers. According to July statistics this year the industry employs over 2125 thousand and the hourly wage rate is estimated to $16.37. This paper discusses the real estate industry on the basis of demand, supply, elasticity of demand and supply, wage rates and wage inequality, how monetary and fiscal policies affect...
7 Pages (1750 words) Assignment

Managerial Economics and Business Environment

Once the above said subject matter is clearly sorted out, the next emphasis would be on the concepts like the opportunity costing, incremental principle, marginal principle, discounting principle, the principle of time perspective, and calculation of economic profit as the guidelines to the scope of managerial economics. (Surender. V, 2008).
To start with, we consider a firm for which different processes have to be carried to achieve its objectives of profit maximization (assuming that all the organizations work with the view to maximize profits). If firms from different sectors are identified simultaneously, then the working of the economy as a whole could also be analyzed which in turn is useful in the decision-making proce...
15 Pages (3750 words) Assignment

Economics in Business

...Economics in business Introduction: The purpose of this paper is to analyze the business objectives as best applicable to the Southampton Solent University. Herein, it is essential for the author to analyze the competitive landscape that the university finds itself and try and identify the forces which are governing the business decisions of the university. Further, the author aims to complete understand the simplex of competitive market forces and subsequently make recommendations for better future functionality of the university. PESTLE Analysis The author feels that it is applicable to use a PESTLE analysis due to the fact that the Political, Economic, Social, Technological, Legal and Environmental aspects of this model...
6 Pages (1500 words) Assignment

Business Economics: Opportunity Costs and Dynamic Comparative Advantage

...BUSINESS ECONOMICS Ans According to Opportunity costs can be defined as the value of the next best alternative foregone (Business Economics StudyGuide, Pp. 13). The opportunity cost of going on the ski trip is the sum of: loss of income from the weekend job $120 The cost of travelling and living away from home $350 the cost of ski hire $60 The cost of food $40 the time (lost) to study 8 hours Total = $570 and 8 hours Explanation: Since we have already decided to go skiing, the money cost involved here can be calculated as follows: Travel and accommodation $350 Ski hire $60 Food $40 Total $450 This tells us the exact amount of money which we shall have to incur in order to go skiing. But while calculating...
6 Pages (1500 words) Assignment

Economics of Business Strategy

.... The company also ensures that it does not abuse its dominant position in terms of controlling the market share(Rubenstein, 27). It does this by establishing a documented code of ethics that guide the behavior of its employees and its operations. As a company in the oil sector, the organization has an elaborate policy to guide itself against lawsuits emanating from environmental degradation. The ethical practice of the organization is to engage its operations in a manner that promotes the conservation of the environment, through reduction of carbonemissions (Clarke, 21). In meeting this objective, the company balances its economic goals and environmental concerns. The policy of the company is to comply with all laws that aim to protect...
8 Pages (2000 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Economics P3 Assignment for FREE!

Contact Us