US monetary policy - Term Paper Example

Comments (0) Cite this document
Federal reserve is represented by private monopolies which make money derived directly from the people of the United States for the benefit of themselves and their foreign customers, foreign and domestic speculators and swindlers, and rich and predatory money lenders…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.4% of users find it useful
US monetary policy
Read TextPreview

Extract of sample
"US monetary policy"

Download file to see previous pages When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. The Federal Reserve is overseen by board of governors based in Washington, which is a government body (Solomon 1996). This board of governors comprise of 7 members appointed by the president of the United States of America, each of them has the capacity to serve for 14 years. All this members must pass through senate for confirmation and are eligible for reappointment. The chairman is the head of the board being deputized by the vice chairman. Both the chairman and deputy are appointed by the president and must pass through senate for approval (Solomon 1996). Ben Bernanke is the current chairman; he took over from Alan Greenspan. The most common tool used by the Federal Reserve is the buying and selling of government securities in order to increase or reduce the amount of money in the banking system and this is done through an open market (Timberlake 1993). When they buy securities, they pump money into the banking system and accelerate growth while sales of securities siphon money from the system. Federal Reserve's aim is to use this technique to adjust the federal funds rate, that is, the rate at which banks borrow from each other (Timberlake 1993). ...
the ones required by the law or rather set by the Federal Reserve board of governors can use the money to bring those changes back to stability (Timberlake 1993). The board of directors of each reserve bank sets the discount rate every 14 days. It's considered the last resort for banks, which usually borrow from each other. The Fed uses the discount rate to check the supply of available funds, which will in effect have impact on inflation and in extension interest rates (Degen 1987). If the available money is abundant, there is more likelihood of inflation occurring. It will become more expensive to borrow from Federal Reserve if interest rate is increased. Short term interest rate will, therefore, be increased by lower supply of money and the opposite is true. Quantitative Easing” (QE) is a kind of operations within markets that assist the Federal Reserve achieve its policy targets (Degen 1987). QE involves open market operations that are not different from the way the Federal Reserve often operates in its quest to attain certain policy objectives. When Federal Reserve changes their target interest rate, it is doing so in order to involve open market operations that alter reserves in the banking system so as to get to its preferred rate.   Open market operations often include moves such as adjusting the existing reserves in the banking system so as to assist reaching a target interest rate. Many people believe that QE operates to achieve its objectives in ways that are different from standard monetary policy, e.g. influencing demand for loans, the wealth effect and interest rate channels (Wells 2004). Much of the misconception is also due to the untruth that QE helps to fund the US government or is equivalent to “money printing”.  This is not true. The main ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“US monetary policy Term Paper Example | Topics and Well Written Essays - 750 words”, n.d.)
US monetary policy Term Paper Example | Topics and Well Written Essays - 750 words. Retrieved from
(US Monetary Policy Term Paper Example | Topics and Well Written Essays - 750 Words)
US Monetary Policy Term Paper Example | Topics and Well Written Essays - 750 Words.
“US Monetary Policy Term Paper Example | Topics and Well Written Essays - 750 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
Monetary Policy
...and food-price inflation is mainly due to crop shortages caused by bad weather. Hence, the actions of monetary policy seek to foster maximum employment and price stability.  Therefore the monetary policy of US should focus on devising strategies and tools for decreasing unemployment rate and boosting the economic growth. Further this would not only provide opportunities to the unemployed but would also help to cover up the losses incurred in the recession period. References: Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue N.W., Washington, D.C. 20551 David E. W. Laidler ,Money and Macroeconomics, Edward Elgar...
3 Pages(750 words)Essay
Monetary policy
...Central banks are independent so that they operate under rules made to help them operate in a political free management (Kurgan and Wells 387). Therefore, this paper aims at obtaining a deep analysis on the role of central bank in use and implementation of monetary policy to stabilize the economy. This will be with respect to the great depression of 1929 to early 1940s. Monetary policy is the mean through which the monetary tools of a country control the flow of money. It mostly focuses on the rate of interest with an aim of promoting economic growth and stability. It is key role is to sustain, stable prices and maintain low levels of...
7 Pages(1750 words)Research Paper
Monetary policy
...aggravate problems of moral hazard and adverse selection. This is shown below by the following graph: In addition, banks cannot tell honest and dishonest borrowers apart since the mix of honest and dishonest borrowers rely on the interest rate. Therefore, at high interest rates majorly high risk borrowers come forward. In this case, increasing the loan rate may reduce bank expected profit (Haan & Eijffinger, 2005). At interest rate which maximises the lender’s return, there is excess demand for credit resulting into what is known as credit rationing whereby customers obtain less than what they wish to borrow while others receive and the rest miss. Essay Two How are “Taylor Rules” used? According to the Taylor Rule was...
10 Pages(2500 words)Assignment
Monetary policy in the US
..., Treasury bill rates, and credit market conditions to help them in forming the country’s monetary policy (“monetary indicators”). The graph on figure 3.3 shows the trend of 2012 key economic indicators in the country. Figure 3.3 2012 Key Economic Indicators (“Leading Economic Indicators”). 3.6 OTHER ECONOMIC FACTORS TAX REGIME In the tax regime of the United States, its corporate tax policy is the most alarming on its economy. The U.S. has the largest corporate tax rate in the world at 35% (“U.S. Corporate Tax Reform”). It also taxes the foreign profits of U.S. multinational corporations which may be used by other industrialized countries, which only tax...
11 Pages(2750 words)Research Paper
Monetary Policy
...? Monetary Policy Financial s and the Economy (INSERT SECTION Monetary Policy Financial s and the Economy Since the country’s founding, the United States Federal Government has struggled with the role and control of a central bank. The controversy surrounding the purpose of a central bank links to theoretical and practical economics and politics. Views concerning the control of a central bank vary from total autonomy to strict guidelines from Congress. In order to determine policy recommendations, the following is discussed: 1. Definitions of terms 2. The history and current role of the Federal Reserve system 3. The money supply and affecting factors 4....
8 Pages(2000 words)Essay
Monetary policy
...? Monetary Policy Answer one: Official cash rate is that rate of interest set by the Board of the ReserveBank of Australia which is charged on the overnight funds that are borrowed or lent between financial institutions. This implies that it is that rate which is charged by financial institutions in Australia’s banking sector to other banks for overnight loans. This official cash rate is an important monetary policy instrument that influences other interest rates within the market. The RBA often determines the official cash rate after deciding on what monetary policy target it intends to attain (Reserve Bank of Australia, 2012a). Such...
5 Pages(1250 words)Essay
Monetary policy
...enacted to be in correspondent with the state of the country in terms of resources and economic endowments. Two approaches are used to realize the economic goals of price stability, growth and development, and stability in the exchange rates. These two ways include monetary and fiscal policy mechanisms. While fiscal policy frameworks focus on aspects such as government expenditure, taxation, and subsidies, the monetary policy represents the stipulations enacted to regulate the flow of money in the economy. Besides, the monetary policy mechanisms are used by the financial institutions to...
8 Pages(2000 words)Essay
Monetary Policy in the US
...Q Identify at least three problems facing the FED in achieving its goals of monetary policy and give your recommendations on how to deal with each of the problems you list? Ans: The three problems that can lead FED in non-achievement of its goals may include: 1. Inappropriate and untimely use of monetary policy tools. 2. Timing difficulties in achieving the monetary policy goals. 3. One policy option tends to destabilize or distort the impact of other policy variable. Recommendations 1. In order to overcome this problem, FED may develop consensus on the use of different...
4 Pages(1000 words)Assignment
Monetary policy
...-changing game plan on the way of handling the Great Panic. viii. The three persons acted to save Bear Stearns and ignored Lehman Brothers, which failed later. ix. The three made things right by adopting the tune of “whatever it takes.” x. They used different powers and tools to get everything back to normal. I would like the class to discuss what the major players of the Great Panic did to terminate the unhinging of the monetary system. 2. The Role of the Federal Reserve i. That apart from the function of the Federal Reserve to control money supply, it also sets key interest rates. ii. In normal market circumstances, the Fed keeps inflation under control. iii. The Fed controls policies...
2 Pages(500 words)Assignment
Monetary policy&fiscal policy
...Monetary Policy and Fiscal Policy Summary of the Monetary Policy Article Federal Reserve recognized that the rate of economic growth was not so fast and the central bank decided to continue purchasing bonds at the rate of $85 billion per month as offered in Fed’s program, as a way of stimulating the economy. Jim Zarroli from NPR in his explanation of whether the program has anything to contribute towards the direction of the economy declined to it having much contribution stating that the view of Fed in the economy is concerned about what has been for some time. He views this as being middling. He notes in relation to this, the high unemployment levels...
2 Pages(500 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 Term Paper on topic US monetary policy for FREE!
Contact Us