StudentShare solutions
Triangle menu

Macro11C - Essay Example

Nobody downloaded yet

Extract of sample
Macro11C

The higher the RR, the lower the amount of money lent by banks and vice versa. 3) Federal funds rate (FFR): The FFR refers to the rate at which banks lend each other money overnight in order to maintain the reserve requirement. If the FFR is high, banks would be unwilling to lend beyond the reserve requirement and vice versa. 4) Discount rate (DR): The DR refers to the rate that the federal reserve charges the bank if it wants to borrow money from it in case when the money is not available to be borrowed from other banks. The DR is usually higher than the FFR. The open market operations are the most widely used tool for controlling the money supply in the market. The decisions for these open market operations are made during the Federal Open Market Committee meetings which since 1981 have been held 8 times at regularly scheduled times each year. These open market operations change the money supply without impact the money multiplier. The most powerful tool that the Fed has to control the monetary policy is the Reserve Requirement. Changing the RR not only impacts the money supply but also the money multiplier as it directly influences the bank lending. ...
Easy money policy: To fight recessions, the Fed can use its monetary policy tools to increase the growth of money and credit, which tends to lower interest rates and spur growth of the economy. This monetary policy is said to be easy or expansionary. Tight money policy: To restrain inflation, the Fed can use its monetary policy tools to reduce the growth of money and credit, which tends to raise interest rates and slow the growth of the economy. This monetary policy is said to be tight or contractionary. For the easy money policy, first the MS increases which causes the interest rate to decrease which causes the amount of investment to increase. This causes AD to increase leading to a higher real GDP and a little inflation. The implementation in reality is done by the Fed by buying securities from banks and/or reducing the reserve ratio for banks, the FFR and the DR. For the tight monetary policy, first the MS decreases which causes the interest rate to increase which causes the amount of investment to decrease. This causes AD to decrease leading to a lower real GDP and a decrease in price levels. The implementation in reality is done by the Fed by selling securities from banks and/or increasing the reserve ratio for banks, the FFR and the DR. Q3: Comment on the theory underlying the use of a monetary rule by the Federal Reserve. Does the use of such a rule seem appropriate under current economic conditions? Explain. The theory underlying the ue of monetary policy by the Federal Reserve is also known as the Taylor Rule. It is an interest rate forecasting model invented by John Taylor in 1992 and described in his 1993 study called “Discretion Vs. Policy Rules in Practice". In general, the Taylor rule mean that for a 1% increase in ...Show more

Summary

Q1: What tools does the Federal Reserve use to control the supply of money? Which is used most frequently? Which is most potentially powerful? Why? The Federal Reserve has several tools at its disposal to control the supply of money. These are: 1) Open market operations: The Federal open market operations refer to the Fed buying and selling securities in the open market…
Author : okris
Macro11C essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Macro11C"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Self Reflection
The self-reflection essay aims to focus on what one feels is still missing or underdeveloped and to outline a development plan to enhance one’s future use of oneself. The purpose of self-reflection exercises is to determine personal strengths and weaknesses in the areas of endeavor that have been accomplished.
3 pages (750 words) Coursework
Economics for Business and Management
Such elements are bound to be reflected through an enhancement in the output being generated but also through an improved rate of employment and reduced rate of poverty. Market system is often regarded as the best mechanism for assuring a society about a good investment climate through an efficient allocation of scarce resources in a society.
12 pages (3000 words) Assignment
Why did Slavery Come to be the Dominant Labor System in the Southern Colonies
Why did Slavery Come to be the Dominant Labor System in the Southern Colonies? Slavery in America has a long history spanning from a John Rolfe report in 1619 which stated that 20 slaves were bought in the last day of August. This was in Virginia and it was the first recorded history about Africans coming to America and being sold as slaves.
3 pages (750 words) Essay
Does Michael Kohlhaas present the view that power corrupts
As a matter of fact, von Kleis spent time in a French prison, arrested by them as a spy. His “burning hatred of Napoleon”, whose wars had driven from his home more than once occasion, no doubt influenced the last few years of his life, including one of his most powerful and influential works, Die Hermannsschlacht, written in 1809 to inspire his fellow Germans to rebel against the French (Witkowski).
4 pages (1000 words) Essay
My career Report ( Dental Hygienist )
These professionals offer three distinctive categories of services to their patients. The first service offered by dental hygienist is preventative services, which aim at the promotion and maintenance of quality oral health. Secondly, dental hygienists offer educational services to their patients, helping them to take on behaviors, which improve the quality of oral health and help patients to appreciate the value of constantly performing these actions.
5 pages (1250 words) Research Paper
Ernst and Young Tax Guide
In East Africa, the most significant aspect of tax reform was the creation of semi-autonomous revenue agencies, beginning with Uganda (1991), Kenya (1995), Tanzania (1996) and Rwanda (2000). Formation of these agencies led to new accountability relations: by placing the responsibility for revenue collection outside the civil service, it was now possible to "bypass" the deficiencies in existing state institutions through offering higher salaries and more flexible procedures for recruitment of staff.
10 pages (2500 words) Essay
Sexual Harassment, Arbitrators and Vacated Awards
Courts will vacate and refuse to confirm an arbitration Award if fraud, corruption or misconduct by the arbitrators is established. The formal grounds for vacating an Award are set out in the applicable statutes and it is usually necessary to prove; that there was a serious conflict of interest on the part of a neutral arbitrator, that the Award was not "final" or that the subject was outside the purview of the arbitration agreement.
4 pages (1000 words) Essay
In Du Tenth Sinks the Jewel Box in Anger, money and love are closely related. How does money affect the beginning, development and end of the relationship bet
Koreans resisted but lacked resources. To pool funds, they enacted a law which enabled the people to buy their way to the imperial academy. And of course many were enticed by this offer. Instead of taking exams, all the wealthy
7 pages (1750 words) Essay
Engineering Design Practice

Injuries, deaths and loss of property resulting from fires each year. The National Building Specification (NBS) has published performance standards in the Approved Document B of the Building Regulations 2000, Volume 1 (2006 edition) for protection of individuals and property from the dangers of fire.

8 pages (2000 words) Essay
Iraq - Global Issues
After the execution of Saddam, Iraq is not free from conflicts and showing no signs of calming down. There are many other reasons for the Iraqi conflicts like migration problems, religious domination and under treatment of women community or male domination over the Iraqi society.
4 pages (1000 words) Research Paper
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment
Contact Us