Nobody downloaded yet

Federal open market committee - Essay Example

Comments (0) Cite this document
Summary
The Federal Open Market Committee plays a key role in setting the rates of interest on loans etc.that are available with banks and other lending institutions.In fact if we consider carefully,monetary and fiscal policy are the two ways in which the money supply and interest rates within an economy are controlled. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.9% of users find it useful
Federal open market committee
Read TextPreview

Extract of sample
"Federal open market committee"

Download file to see previous pages The Federal Open Market Committee plays a key role in setting the rates of interest on loans etc. that are available with banks and other lending institutions. In fact if we consider carefully, monetary and fiscal policy are the two ways in which the money supply and interest rates within an economy are controlled. This has impact on the rates of inflation, employment, job creation, productivity and a whole lot of other factors that form part of our financial and economic well being and affect the National Statistics and state of the economy. In this assignment we are going to take on the role of the Federal Open Market Committee and make a decision on short term interest rates for the USA. Discussion The term ‘Open Market Operations’ refers to the actions of the FOMC in directly controlling the money supply available with banks and indirectly by affecting the rates of interest and lending available with banks (Samuelson & Nordhaus, 2004). If the FOMC has decided to tighten monetary supply and credit expansion, it will sell securities in the open market at a higher rate, which have to be picked up by the banks. Using part of their money supply to achieve this objective, it leaves the banks with reduced capacity to give out loans. As the amount of lending has a connection with available reserves, a reduction in lending reserves would automatically put a dent in credit expansion and lending would dry up. So here the FOMC has managed to reduce credit expansion. On the other hand, if it was desired to increase the credit supply in the economy, the FOMC would work to buy securities from the open market and in doing so, give the banks funds which they could use for lending purposes. This would make lending easier and the economy would receive a boost by way of increased trade and investment opportunities. It is notable that Open Market Operations is only one tool at the disposal of the FOMC to control the money and credit available in an economy. Being a Banker to the Government, printer of US currency notes, Bankers Bank, increasing and decreasing the Reserve Ratio, and even applying moral persuasion are some of the ways in which the Federal Reserve seeks to exert a good measure of control on prices, productivity, inflation and employment in the USA (Samuelson & Nordhaus, 2004). Analysis of Current Economic Conditions Let us now move on to the actual statistics at the present time. The CPI as of May 2011 stands at 224.804. Prices have been rising slightly in recent years, as costs to produce goods and services have gone up. The GDP was 15018.1 for Q1 of 2011 and GNP was 15255.1 for the same period. This also registered a slight increase, which may be a combination of price and productivity factors. Total nonfarm private payroll employment stood at 108677 as of June 2011. The Industrial Production Index stood at 92.9815 as of May 2011. All of these figures show a slight increase, indicating that the economy is on the rebound. The Industrial Production of Durable Goods was recorded at 88.3948 as of May 2011 and Industrial Production of Final Goods (Market Group) was recorded at 94.6823 for the same period. Increase trends here mean that the economy is still recovering from the depression. The figure for Housing Starts of new privately owned housing units was 560 in May 2011 picking up slightly from 541 units the month before. Number of units authorized but not started hovers around 81. The housing market has been most affected by the depression and will take some time to pick up- at the moment we are seeing lackluster demand despite low interest rates. A lot of homeowners were burned in the last financial crisis. Real retail sales for consumer and food items stood at 172202 in May 2011 registering a drop from 172902 a month before. This means that consumer confidence is still lacking and people are still apprehensive about their next paycheck- consequently consumer spending has hardly picked ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Federal open market committee Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.org/marketing/1428148-federal-open-market-committee
(Federal Open Market Committee Essay Example | Topics and Well Written Essays - 1000 Words)
https://studentshare.org/marketing/1428148-federal-open-market-committee.
“Federal Open Market Committee Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/marketing/1428148-federal-open-market-committee.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
The Federal Open Market Committee
...? The Federal Reserve The Federal Open Market Committee The Central Bank of a country has the power to influence the supply and value of money and credit in the economy to achieve certain economic objectives. The Central Bank undertakes certain actions for this purpose and this implementation is called the “Monetary Policy”. The Federal Reserve Act of 1913 empowers the Federal Reserve Bank of U.S.A to implement the Monetary Policy in the country. (Board of Governors of the Federal Reserve System, 2011) The Federal Reserve controls the monetary policy through mainly three policy...
6 Pages(1500 words)Coursework
Audit Committee
...? Internal Control Framework Question What is Audit Ethics? Define and explain the Independence and External Part of Audit Committee? Answer: The Code of Ethics states the ideology and potential leading the actions of folks and organizations in the ways of internal auditing. It describes the least provisions for conduct, and behavioural prospect relatively than precise actions. The idea of system of moral values is towards encouraging the moral traditions inside a career of internal auditing. Internal auditing is an autonomous, intention pledge, a consult action considered towards inserting importance as well as progress the organization operation. It assists a business to achieve the aim through fetching methodical,...
7 Pages(1750 words)Essay
Open
... that is useful to these agencies. In addition, professional historians have the ability to conduct research and come up with data that is extremely useful in most countries. In conclusion, the study of past events is critical to both the public and private segment. Therefore, the study of history prepares the learner for various job slots in the career market. Individuals must study history to gain information about past experiences. As a matter of fact, history has significantly aided in appreciating different individuals and societies globally (Stearns 1). Works Cited Quote garden. Quotations about history. NP, 2012. Web. Stearns, Peter. Why Study History? Washington: AHA P, 2008. Web. ... number: History and Political Science History can ...
3 Pages(750 words)Essay
Open
...efficiency in the market which prevails if the stock market allows funds to be directed to the firms which are likely to make the most prudent and lucrative use of it. In addition to operational efficiency, there is an operational efficiency in the market which is incurred by the participants in the financial markets. An example of this would be commission earned on the share transactions, spread between the lending rates and borrowing rates in the market or the fee on the loan arrangement. The operational efficiency prevails in the market if the transaction costs are kept as low as possible and this particular cost is low in a...
15 Pages(3750 words)Term Paper
Federal Reserve and the Open Market
... Market Committee, the Federal Reserve Banks, and the Board of Directors. The Board of Governors, which consists of seven members, is mostly responsible for "the formulation of monetary policy" (Federal Reserve, 2006). These seven are also part of the Federal Open Market Committee, which is responsible, on the other hand, for any decision-making regarding "the cost and availability of money and credit in the economy" (Federal Reserve, 2006). The Federal Open Market Committee "is the most important monetary policymaking body" of the Fed. Besides being responsible for policies directed toward economic growth, among other things, it is this particular department that is in charge of making decisions regarding open market operations... ...
4 Pages(1000 words)Essay
-OPEN-
...Poetry, Fantasy Literature and Cultural Traditions Whosoever defined literature as life is absolutely right. There are ample examples that prove the all-encompassing capabilities of literature. As there are different types of human societies, literature manifest itself in diverse ways. Poetry, prose and drama are the commonest ways through which literature expresses itself. Another means through which literature expresses itself is fantasy. In fact, some writers are mainly known as creators of fantasy. Although, they are categorized differently, fantasy literature shares certain features with poetry. However, in the analysis of both genres of literature, one must recognize the fact that they are produced by various societal... Fantasy...
6 Pages(1500 words)Essay
Th fed-how it manages the economy and the federal open market committe
... The fed-how it manages the economy and the federal open market committee The Fed or Federal Reserve acts as the central bank of the USA after the passing of Federal Reserve Act in December 23, 1913. It is composed of seven member Board of Governors that direct the monetary policy, a Federal Open Market Committee (FOMC) composed of 12 members that determines the Fed funds rate (the rate where the prevailing interest rates are based upon). It has twelve regional banks across the USA that oversees commercial banks and implements the Fed’s monetary policy (Federalreserve. Gov). The Fed controls the three tools of monetary policy--open market operations, the discount rate, and reserve requirements. The fed uses its monetary policy... and...
2 Pages(500 words)Essay
Committee Memo
...John Carlisle, President Cc: Richard Bartocelli, Vice President, Department of Research and Development Chair of New Product Committee Date: October 24, 2012 Subject: Status of Lexivia Project This is to update you regarding the latest status of Lexivia project. In the last monthly meeting, held on October 3, two major facts came to light that might delay the project. William Song, our outside patent attorney had informed that the drug composition of Lexivia and its potential use as heart medication was revealed in an article written by one of the company’s scientists in Journal of Experimental Pharmacology in April 2009 issue. Article was written before patent application was filed. The issue needs to be investigated...
1 Pages(250 words)Assignment
The Description of the Federal Reserve and Federal Open Market Committee
...Question 1 The Federal Reserve works to stabilize the money market by ensuring stable price and natural rate of unemployment. Therefore, the employment being above the natural rate, Fed through the Federal Open Market Committee engages in buying and selling bonds and other government securities to increase money in some sector of the economy while selling to minimize money supply in targeted sectors. Moreover, the country has been hit by a financial crisis in 2008, and since then there has been tremendous growth as Fed injected stimulus packages in the financial sector. For this reason, the action of the Federal Reserve is to observe that the economy is fully out of recession. It has, therefore, maintained inflation target of 2... monetary...
2 Pages(500 words)Term Paper
Open
...Capital Punishment is not an Effective Form of Punishment By Capital Punishment is not an Effective Form of Punishment As a form of punishment, death penalty is one of the oldest forms of punishments meted out against criminals guilty of grave crimes. In the modern world, many nations practise death penalty as the ultimate form of punishment for heinous crimes. Despite the widespread use of death penalty as a form of punishment, however, a critical look at death penalty shows that death penalty is not an effective form of punishment. This is because studies in social sciences have revealed that death penalty is not an effective form of punishment. This paper gives an argument in support of the view that death penalty... Punishment is not an...
2 Pages(500 words)Essay
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 Federal open market committee for FREE!
logo footer
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • StudentShare App Store
  • StudentShare Google play
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • Miscellaneous
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us