Nobody downloaded yet

Economics of Construction is the class... i need a 3 page paper on Describe the federal reserve system and the various ways it effects the market economy - Essay Example

Comments (0) Cite this document
Summary
Monetary policy could be well understood from its primary objective that is, stabilizing price level in the economy. The phenomena of price rise is largely because output…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.1% of users find it useful
Economics of Construction is the class... i need a 3 page paper on Describe the federal reserve system and the various ways it effects the market economy
Read TextPreview

Extract of sample "Economics of Construction is the class... i need a 3 page paper on Describe the federal reserve system and the various ways it effects the market economy"

Download file to see previous pages The V and Q are fixed so that any change in M causes a proportionate change in P. To control P, it is therefore necessary that M be brought under control. Any policy with respect to this is known as monetary policy.
Amongst various instruments available with central bank are interest rates, reserve requirements, interventions in the credit market and so on. These instruments are used to influence the demand for liquidity and, thus, M could be controlled.
In fact, Federal Reserve uses several policy instruments to reduce the adverse effects of fluctuations in income. An important instrument used to influence money supply is interest rate, which is signaled by Federal Rate. In the transaction motive for money, there is an inverse relationship between opportunity cost of money that is interest rate and demand for liquidity. As such, if Federal targets inflation, it would have to increase interest rate so that liquidity is removed from the system. Any increase in interest rate would induce people to part away liquidity and thereby bring about stability in the price level.
Second mechanism operates through credit market. It is assumed that borrowing from credit market finances entire investment spending. Credit expansion is an important mechanism for money creation; thus, if credit expansion is controlled, money supply can be controlled and so price could be controlled. Federal could use interest rate directly to influence credit creation.
A necessary and sufficient condition for investment to take place is that marginal efficiency of capital, measured by rate of return, should be at least or equal to cost of capital, given by interest rate. With every increase in Federal rate, the Federal Reserve indirectly increases cost of capital such that the basic condition for investment spending gets violated. This reduces incentives for private investment resulting is lack demand for credit. Similarly, if the economy has slowed down, they could reduce ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Economics of Construction is the class... i need a 3 page paper on Essay”, n.d.)
Economics of Construction is the class. i need a 3 page paper on Essay. Retrieved from https://studentshare.org/miscellaneous/1567048-economics-of-construction-is-the-class-i-need-a-3-page-paper-on-describe-the-federal-reserve-system-and-the-various-ways-it-effects-the-market-economy
(Economics of Construction Is the class... I Need a 3 Page Paper on Essay)
Economics of Construction Is the class... I Need a 3 Page Paper on Essay. https://studentshare.org/miscellaneous/1567048-economics-of-construction-is-the-class-i-need-a-3-page-paper-on-describe-the-federal-reserve-system-and-the-various-ways-it-effects-the-market-economy.
“Economics of Construction Is the class... I Need a 3 Page Paper on Essay”, n.d. https://studentshare.org/miscellaneous/1567048-economics-of-construction-is-the-class-i-need-a-3-page-paper-on-describe-the-federal-reserve-system-and-the-various-ways-it-effects-the-market-economy.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Economics of Construction is the class... i need a 3 page paper on Describe the federal reserve system and the various ways it effects the market economy

Federal Reserve Paper

.... international policies and procedures, in cooperation with the U.S. Department of the Treasury and other agencies, with respect to global financial markets and international institutions. 5. Promote understanding of Federal Reserve policy among other government policy officials and the general public. Conclusion In closing the Federal Reserve System has rendered it monetary policy to have a positive effect on the economy’s current state. With the support of Acts and the power of inflation the policy can return desirable outcome in inflation to the Federal Reserve Board....
3 Pages(750 words)Essay

The Federal Reserve System

...into the system and increases the excess reserves held by the banks besides increasing prices of the financial assets. By increasing money supply in the economy, FED therefore attempted to remove the concerns for liquidity in the market created as a result of credit crunch. Conclusion Federal Reserve System took two important steps in the wake of the current economic crisis in order to ensure that economy remains on track. By lowering the federal fund rate or discount rate, FED made borrowing cheap so that household consumption could be increased besides increasing the...
3 Pages(750 words)Term Paper

The Federal Reserve System

...?Introduction The role of a central bank in any economy is to manage the monetary policy of the country while ensuring that it manages to achieve broader macroeconomic objectives. One of the key objectives of any central bank is therefore to ensure that inflation within economy remains under control. The flow of money within the economy therefore should be managed in such a manner that it supports the achievement of low inflation, economic stability as well as the low unemployment level within the economy. The Federal Reserve System or Fed is the central bank of US and is operating at both the federal as well as State level. Created in 1913 through Federal Reserve Act, it has served US as one of the leading economic policy making... as well...
8 Pages(2000 words)Term Paper

The federal reserve system

...The Federal Reserve System The Federal Reserve, or the central bank, is among the most powerful economic institution in the United States of America. The Federal Reserve was given the power over regulation of the value of money by congress. In simple terms, the Federal Reserve came into being by enactment of the Congress. Consequently, the Congress has the obligation of overseeing the monetary policy and the Federal Reserve. This paper analyzes the importance of the Federal Reserve and...
3 Pages(750 words)Essay

Federal Reserve system

...? Macro 11 College: Question one The Federal Reserve System (FED) is responsible for the implementation of the monetary policy by managing the balances that financial institutions have in Federal Reserve banks. Besides this control of money, FED supplies currency and supervises the banking system. The money supply which consists of the circulating currency and bank deposits needs to be controlled in order to balance the lending and borrowing capacity of the financial institutions. FED uses three tools to control the money supply: changing the reserve requirements, open market operations, and changing the discount rate (Tucker, 2010, pg.408). Changing the reserve requirements. The banking system is required to keep a certain amount... in...
5 Pages(1250 words)Essay

Federal Reserve Paper

...?Monetary Policy The Federal Reserve System is the Central Bank in the United s abbreviated as FED. The FED has various functions which include managing the money and credit supply in United States. It operates at the centre of the financial system of the United States. The FED also keeps business running in the nation through supply of currency, coins, and services payments such as check clearing and electronic funds transfer (Solow & Taylor, 2008).The paper will look at the U.S Federal Reserves monetary policy in detail addressing various issues. Purpose and function of money Money has...
3 Pages(750 words)Essay

Federal Reserve

...?Need of Federal Reserve for the US: Justification The Federal Reserve System is the central banking structure of US. The Federal Reserve was established in 1913 with the need of a central financial system in the economy of US. The central banking system was set up under a situation of continuous financial panics in the economy of US. The structure, roles and the responsibilities of the Federal Reserve has undergone rapid changes over the years which have been mainly stimulated by the...
5 Pages(1250 words)Essay

The Federal Reserve System

...The Federal Reserve System To provide the United s with a stable monetary and financial system, Congress established the Federal Reserve Bank System (Fed). The Federal Reserve Act of 1913 signed by Woodrow Wilson designated the Fed, the central bank, with the responsibility for establishing monetary policy. Monetary policy is the actions taken by the central bank to influence the availability and cost of money and credit to assist in promoting national economic goals. The Fed's monetary policy decisions affect the flow of money and credit in the economy....
3 Pages(750 words)Essay

U.S. Federal Reserve System

.... Secondly, it works as a regulatory in buying and selling of securities in an open market and as a government’s bank, it issues U.S currency. Thirdly, as a regulatory agency, it monitors that the rights of consumers are protected, and ensures that things run smoothly in banks. However, the current economic policy is focusing on unemployment and does not include plans to raise interest rates (Plossers, pp. 1-3). Moreover, the current monetary policy is not working well the decline of dollar is problematic for businesses. Due to the fact, investments are drastically decline whereas; foreign investments are speaking out and divesting (Philadelphia, pp. 2). According to personal opinion,...
2 Pages(500 words)Research Paper

Federal Reserve

...to have strengthened including transportation and professional services (Federal Reserve Bank, 2013). By the beginning of March 2012, the US economy was reported to continue flourishing at a modest to moderate pace and economic activities rose at a faster rate in various states. Most states also recorded an economic improvement in various sectors such as manufacturing, agriculture, real estate and construction industry, banking and services as well as tourism and hospitality industry. The hiring rate was also reported to have increased significantly across several districts. Consumer expenditure was...
2 Pages(500 words)Article
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 of Construction is the class... i need a 3 page paper on Describe the federal reserve system and the various ways it effects the market economy for FREE!

Contact Us