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.
Nobody downloaded yet

Economics P3 Assignment - Essay Example

Comments (0)
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
Economics P3 Assignment
Read TextPreview

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 pagesRead More
Comments (0)
Click to create a comment or rate a document
Economics Assignment
Monetary policy: The monetary policy refers to changes in money supply brought about via government interventions. The government may change money supply using various tools. One of the ways is by using monetary base control; the government has full control over the money supply in the economy (the total currency held by the non bank public, volt cash held by banks and reserves of commercial banks with the central bank.
5 Pages(1250 words)Essay
Assignment in Micro economics
Microeconomics is therefore the study of how firms, individual, and households allocate the resources at their disposal to satisfy their limitless and recurrent need. Since resources are limited, it is important for the consumers to rank their demands and wants in the order of preferences.
3 Pages(750 words)Essay
Economics Assignment 2
Economic growth is measured as percentage change in real GDP. There is an implicit link between economic growth and GDP. The GDP is often referred to be the proxy for human development as well as well being. But it is difficult to judge the relation between economic growths with well being.
5 Pages(1250 words)Essay
P3 IP1
Hence, the report herein outlines the potential cost variances that will originate from the taking back the production to home location. It also draws on to costs in case company continues in foreign market and finally its financial implications on the stakeholders.
3 Pages(750 words)Essay
Economics Assignment
The theories like, Theory of Demand, Theory of Market Structure and Theory of Long Run business, would be used by the researcher to conduct the analysis. The researcher would use several real life evidences to show the empirical verification of the analysis.
7 Pages(1750 words)Essay
Economics Assignment
(Harberger, AC) In an attempt to completely understand and describe the monopoly, causes, types and relevant issues, it becomes necessary to approach the subject from as a simplistic nature as possible, to stay aligned with the underlying microeconomic structure.
9 Pages(2250 words)Essay
Economics Assignment
The present paper deals with a similar situation invoked out of a shortage in the supply of oil due to excessive usage and high
4 Pages(1000 words)Essay
Assignment in Micro economics
Individual consumer’s focuses on maximizing their utility subject to their budget line (MagrabI, 1991). On the other hand, producer’s aims at maximizing their profits subject to their production Isoquants (Mceachern,
3 Pages(750 words)Essay
Economics Assignment
The countries often do not prefer negative trade balance while trading with the other countries and this is also often a macro-economic objective too for the healthy growth of the economy. The below-mentioned chart speaks about the
5 Pages(1250 words)Essay
Waste en P3
This time interval is not located for any activity. I consider this time interval from 11:00 am to 11:30pm as the amount of time used to produce waste because the student has not added any
1 Pages(250 words)Essay
Let us find you another Essay on topic Economics P3 Assignment for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us