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Essay / Research Paper Abstract
This 4-page paper discusses the Federal Open Market Committee, price stability and the GDP. Also discussed is the current FOMC decisions. Bibliography lists 3 sources.
Page Count:
4 pages (~225 words per page)
File: AS43_MTfomcanly.doc
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Unformatted sample text from the term paper:
the monetary policy. The latter is handled by the Federal Reserve, also called the Fed. Along those lines, the Fed controls three tools of monetary policy; open market operations, the
discount rate and reserve requirements (About the FOMC, 2011). While the Board of Governors of the Federal Reserve System handles the discount rate and reserve requirements, the Federal Open Market
Committee (FOMC) handles open market operations (About the FOMC, 2011). When we talk about "open market operations" were referring to the acquisition and sale of U.S. Treasury bonds and other
securities. The FOMCs decision to either buy or sell securities (which, in turn, is made based on what the federal funds target rate is), either adds more money to the
economy (increasing capital to banks, meaning banks have more to lend and interest rates are lower) or takes money away from the economy which, in turn, makes the cost of
lending money (i.e., interest), higher. In other words, open market operations, overseen by the FOMC, in theory impact both how much money and credit are available in the banking system
which, in turn, impacts interest rates which, in turn, impact decisions by households and businesses about how much to borrow and spend.
Now, in theory, the FOMC, which meets eight times a year to examine the economy and to make decisions about how to keep it on an even keel. However, anyone
who has picked up a newspaper or turned on the financial channel in recent months understands that, despite the Feds buying up of treasuries, not to mention keeping its interest
rate practically to nothing, the U.S. economic growth rate has remained horribly sluggish. The continuing miniscule growth of the economy has led to what Michael Derby (2011) calls "fractious" meetings
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